TPG has raised initial capital for its new real estate credit strategy during what chief executive Jon Winkelried considers to be an opportune time to be active in the space.
“The combination of downward pressure on real estate values, reduced lending appetite and elevated borrowing cost has created what we believe to be one of the most interesting investing environments we’ve seen in at least two decades,” he said during the firm’s Q3 2023 earnings call last week.
For TPG Real Estate Credit Opportunities, the firm received commitments of more than $750 million to date, said Jack Weingart, the firm’s chief financial officer. TPG registered the fund with the SEC in September.
Commenting on the build-out of the firm’s real estate credit platform, Winkelried said the firm already originates loans through its public REIT, TPG Real Estate Finance Trust, but added: “TRECO is really broader in terms of the types of opportunities we will pursue, so over time, we’ll continue to add to our origination capabilities.
“We feel like we’re well connected to the sources of flow, if you look across the banks in particular that are systemically under pressure looking to shed assets in certain cases. That’s a clear opportunity for us in this market. If you look at financing solutions that certain real estate players have in the market right now, it’s a very disruptive market.”
According to Winkelried, the platform will benefit from the firm’s deep relationships across the real estate market, both from building out TPG Real Estate Partners, its opportunistic real estate equity investment platform, as well as from the real estate franchise of Angelo Gordon – the New York-based credit-and real estate-focused investment firm that TPG acquired earlier this month – in a number of different markets.
“Real estate financing overall right now is a pretty broken market,” he said. “Our expectation is that we will be able to flex between public markets and private markets as a result of having a pool of capital. The team at Angelo Gordon on the structured credit side is also seeing those types of opportunities. So, I think we’ll scale the business in a way that’s consistent with what we see the opportunity to be and both in terms of resources and footprint.”
At the end of September, the firm had invested $1.36 billion of its latest real estate opportunistic vehicle, the $6.8 billion, 2022-vintage TREP IV. Winkelried said the firm had “intentionally moderated its investment pace in anticipation of more attractive opportunities” that are beginning to be seen now. TREP deals completed during the quarter included a $1.5 billion transaction in partnership with Digital Realty Trust to capitalize a portfolio of high-quality data centers in Northern Virginia with more than one million square feet in total.
Other fund investments included a $1.5 billion tender offer to acquire Intervest, a Benelux-based logistics REIT. Winkelried said the firm is working on another industrial deal that it hopes to sign very soon in North America. “We think these are great risk-reward opportunities now as a result of pricing and the general dislocation,” he added.
Following its acquisition of firm Angelo Gordon, TPG now has a combined real estate platform that totaled $36 billion in AUM as of September 30, 2023.
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