TPG Has $6B To Spend To Take Advantage Of CRE 'Dislocation'

Asset managers are licking their chops and looking to raise gobs of capital to try to buy commercial real estate assets at what some analysts say is the bottom of the market.

One of the firms that figures to be among the biggest players is TPG Real Estate Partners, with TPG CEO Jon Winkelried saying on an earnings call this week that the firm has amassed $6B in "dry powder" to spend on real estate, with a focus on the life sciences, data center, industrial and student housing sectors.

"The significant market dislocation is creating unique opportunities for us to acquire high-quality assets that rarely become available for sale,” Winkelried said, according to a transcript of the Aug. 8 call. "Our pipeline continues to build as we source investments across numerous geographies and within attractive subsectors."

Winkelried’s commentary comes as investment in U.S. commercial real estate has nose-dived, dropping 64% year-over-year in the second quarter to $75B, according to CBRE. But CBRE also reported that asset prices could stabilize this quarter for most asset classes as the Federal Reserve nears an end to its interest rate hike policy to combat pernicious inflation. CBRE's researchers said office values aren't expected to stabilize until 2024 at the earliest.

TPG deployed $2.8B in the second quarter, and adding deals that have not been fully signed, TPG is set to deploy $5.5B in incremental capital, Winkelried said. He also added that TPG has raised $2.6B for a host of first-time funds, including general partnership funds in Europe and North America and its life sciences fund, which raised more than $250M.

Over the past few weeks, TPG paid $1.5B to partner with Digital Realty on a 1M SF portfolio of data centers in Virginia, Winkelried said. In June, Alloy Properties, the life sciences arm of TPG, and Anchor Line Partners purchased a five-building life sciences portfolio in Boston from Alexandria Real Estate Equities for $365M. 

"This transaction highlights how we can play offense in a tough market and build value in our portfolio of companies through strategic add-ons," Winkelried said. "We were able to acquire these outstanding properties in the Boston suburbs on a proprietary basis as a direct result of our deep sector expertise."

TPG, one of the largest asset management firms with nearly $140M in assets under management, including $20B in real estate, plans to close in the fourth quarter on its $2.7B acquisition of Angelo Gordon.

Winkelried said during the earnings call that the combined platforms will expand its capital base with institutional limited partners. Currently, TPG has 600 such relationships and Angelo Gordon 500 institutional limited partners, Winkelried said, with only 100 relationships overlapping between the two firms.

“Clearly, there's been an uptick in the nature of the dialogue there, where there are, in some cases, funds or owners of assets that have to do something based upon needing to sell certain assets, sell assets that are high-quality assets in certain cases because those are the ones they can sell,” Winkelried said. “So we feel pretty good about that opportunity that's in front of us there.”