TPG to step up real estate deployment with $15bn of dry powder

Included in the firm's arsenal of capital is $2.5bn raised for two Asia real estate funds following its acquisition of Angelo Gordon.

TPG continued to accelerate its pace of deployment, particularly in private equity and real estate, during Q1 2024, according to chief executive Jon Winkelried.

“In 2023, our deployment pace more than doubled in the second half of the year compared to the first half, and has  remained strong through the first quarter of 2024,” Winkelried said during the firm’s Q1 2024 earnings call last week.

The firm actively invested across its real estate platforms including TPG Real Estate, TPG AG Real Estate and its real estate credit strategy TPG Real Estate Credit Opportunities during the first three months of the year.

“Within our equity strategies, a higher-for-longer rate environment is continuing to create a wide range of investment opportunities that we are pursuing on a very selective basis,” he noted. For example, TPG Real Estate completed the acquisition of a large office building in downtown Manhattan last month and plans to convert the asset into an approximately 800-unit multifamily rental property.

“This was a result of our broader thesis on secular headwinds within the office market and the opportunity to pursue office-to-residential conversions as multifamily fundamentals in New York City have been historically resilient.”

Within TPG AG Real Estate, Winkelried said the firm’s net lease business has seen a significant increase in activity from corporate owner-occupiers. “Given the cost and challenges within the traditional financing markets, many companies are seeking alternative forms of balance sheet financing. As a result, we are seeing entry cap rates at their 15-year highs.” The firm entered into three separate sale-leaseback transactions in “highly attractive” sectors that “are insulated from typical economic cycles” during the quarter.

Additionally, the firm began investing from its inaugural real estate credit fund in the first quarter and have already closed three investments with mid-teens return targets. The transactions, which are concentrated in the multifamily sector, “are representative of the opportunities we are seeing as a result of elevated borrowing costs and a reduced lending appetite from banks,” Winkelried said.

The real estate businesses had nearly $15 billion in combined dry powder at the end of the quarter, Winkelried said. Notably, the firm raised nearly $2.5 billion for two TPG AG real estate funds – TPG AG Asia Realty Fund V and its first onshore Japan Realty Value fund.

TPG AG Asia Realty Fund V is the first Asia real estate fund TPG AG has closed following the acquisition of Angelo Gordon by TPG late last year. With $2 billion in commitments, Fund V is $700 million more than its predecessor AG Asia Realty Fund IV. With a $1 billion target, Fund IV closed in 2019 with $1.3 billion.

Meanwhile, TPG AG Japan Realty Value Fund is TPG AG’s first onshore fund for value-add real estate investments in Japan. With $420 million in commitments from the Japanese institutional investor community, the vehicle will target value-add investments across industrial, office, residential and retail in the country.

“We are excited to expand our value-add real estate investing activities across Asia with the support of new and existing LPs via TPG AG Asia Realty Fund V, our largest Asia real estate fund to date,” said Wilson Leung, head of TPG AG Asia Real Estate, in a release on the fund closes. “We also welcome the opportunity to deepen our partnership with Japanese institutional investors through our TPG AG Japan Value Fund.”

Not only did the Angelo Gordon acquisition give TPG a strong real estate presence in Asia, but it doubled the size of the firm’s real estate platform.

The TPG and TPG AG platforms have relatively little overlap, according to a PERE report. For example,  Angelo Gordon’s real estate strategies include value-add and net lease, while TPG’s legacy business lines target opportunistic and core-plus real estate.