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TPG Seeks $2 Billion for Multi-Investor Real Estate Fund

Taylor Morrison Home Corp
Deals in TPGRE I include stakes in North American homebuilder Taylor Morrison Home Corp. Photographer: David Paul Morris/Bloomberg

TPG Capital, the private-equity firm that formed a real estate division after the credit crisis, is trying to raise as much as $2 billion for its first multi-investor property fund.

The firm, whose real estate unit was founded by Kelvin Davis, a senior partner, has begun soliciting pledges for the new fund, according to investor presentation documents and two people with knowledge of the situation. They asked not to be identified because the fundraising is private.

TPG is among private-equity firms that have been chasing distressed real estate assets since the U.S. housing collapse and Europe’s economic crisis depressed commercial property values worldwide. The Fort Worth, Texas-based company is seeking to capitalize on investor appetite for real estate at a time of low rates on fixed-income assets.

TPG’s property investments since late 2009 were ultimately bundled into an investment vehicle called TPG Real Estate I, and the new fund is known as TPGRE II, according to the 60-page presentation to prospective investors. TPGRE I contains 10 deals representing $2.3 billion of equity that came from the firm’s main buyout funds and separate accounts with institutional clients such as New Jersey’s state pension fund and Ivanhoe Cambridge, the real estate arm of the Canadian pension fund Caisse de Depot et Placement du Quebec.

Homebuilder, Offices

Deals in TPGRE I include stakes in North American homebuilder Taylor Morrison Home Corp., Catellus Development Corp., office landlord Parkway Properties Inc. and European warehouses. The firm also owns office buildings in London and Silicon Valley.

TPG seeks to buy property assets and companies at discounts to underlying net asset values, according to the presentation. The firm has 16 people devoted to real estate in San Francisco, New York and London. Davis, who has worked at TPG for 14 years, is a co-founder of Colony Capital LLC, led by Tom Barrack. He and Avi Banyasz are co-heads of TPG Real Estate.

Owen Blicksilver, a spokesman for TPG, declined to comment on the fundraising.

TPG’s new fund would be among the largest opportunistic real estate funds, after two pools for Europe and the Asia-Pacific region being raised by Blackstone Group LP, according to Preqin Ltd. Many investors last year moved away from focusing on low-risk real estate and are looking for higher-risk, higher-return opportunities, the London-based research company said.

Gaining Momentum

“There are clear signs of more momentum in the fundraising market,” Preqin said in its 2014 global real estate report. A total of 451 funds seeking a combined $150 billion of investor capital were raising money as of last month, the firm said. “It remains very difficult for managers to stand out from the crowd.”

A total of 162 private real estate funds raised a combined $76 billion last year, compared with 224 funds that gathered $67 billion in 2012. Last year’s total money raised was the most since $141 billion was collected in 2008, Preqin said.

TPG is planning to complete the first round of capital pledges by March 31, according to the investor-presentation document. The firm will charge a management fee of 65 basis points on committed capital and staggered fees on invested capital, starting at 1.5 percent of the first $50 million, dropping to 1.25 percent on the next $150 million and 75 basis points on amounts of more than $200 million, according to the document. TPG would receive 20 percent of any profits after an 8 percent preferred return.

TPG Contribution

TPG will contribute 2 percent of the capital, or $40 million based on the $2 billion fundraising target.

TPG’s hiring of Robert Weaver as a senior executive in October 2011 had spurred speculation that the firm would start a real estate fund. Weaver was previously at Morgan Stanley, where his specialty was raising money from investors. Morgan Stanley’s property-funds unit was the biggest real estate investor among Wall Street firms until the 2008 credit crisis.

Last year, TPG acquired Assisted Living Concepts Inc., which operates a chain of residences for seniors. In 2009, TPG teamed with Barry Sternlicht’s Starwood Capital Group to invest in bankrupt lender Corus Bankshares Inc., gaining assets including apartments in Florida that it’s been selling amid a recovery in the residential rental market.

Other TPG real estate investments include Merin, a Dutch office and industrial-property landlord, and a minority stake in AV Homes Inc., a Scottsdale, Arizona-based homebuilder.

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