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TPG makes real estate debt push

The real estate arm of the private investment firm has acquired a $2.5 billion property loan book as well as an 11-person team from Deutsche Bank.

Fresh from announcing a deal to buy a UK mortgage servicer, TPG Real Estate is taking its biggest step to date in building a US real estate debt business.

The property unit of private investment firm TPG has purchased a 75 percent stake in a $2.5 billion portfolio of high-yield real estate loans from Deutsche Bank’s special situations group, which will retain the remaining 25 percent interest. As part of the deal, TPG also is hiring a large financing team from the investment bank. Terms of the deal were not disclosed.

The portfolio comprises 57 performing first mortgages on commercial real estate properties in US gateway markets such as New York and Los Angeles. The assets, which are in the apartment, office, condominium, hotel and industrial sectors, are considered transitional and not easily financed by traditional lenders. The mortgages have a weighted average life of less than three years and an average loan size of approximately $40 million.

As part of the transaction, TPG also picks up a team of 11 origination and risk management professionals from Deutsche Bank’s special situations group for its newly-created mortgage real estate investment trust, TPG Real Estate Finance Trust, which will own the portfolio as well as originate new loans to new and existing borrowers. The new REIT will originate new loans through more than $750 million in total equity commitments raised from a group of institutional investors.

“We are very excited about this unique, proprietary opportunity to acquire the existing portfolio, as well as to expand the business as we grow the platform through new originations,” said Avi Banyasz, TPG partner and co-head of TPG Real Estate, in a statement. “We are very fortunate to have the same strong Deutsche Bank team in place, which will provide continuity for current borrowers and open the door to relationships with the growing number of new borrowers in need of financing.”

“Our leading commercial real estate franchise offers a highly diversified product suite to our clients,” added Elad Shraga, head of structured finance at Deutsche Bank. “This new platform, which combines DB’s expertise in high yield CRE debt and the strength of TPG’s global brand, will improve this client experience.”

TPG lately has indicated a strong interest in real estate debt. Last week, the firm’s special situation partners group and The Blackstone Group’s tactical opportunities business announced an agreement to acquire Acenden Mortgage Servicing Solutions, a UK-based mortgage servicing firm, from the administrators of Lehman Brothers. The two parties also purchased Kensington, a specialty UK residential mortgage lender for £180 million ($289 million; €224 million) in September.