Investment firm TPG Global is diversifying by agreeing to a $2.7 billion deal to buy Angelo Gordon, a credit and real estate investor that works with distressed debt, in a move that could help it take advantage of higher interest rates and tighter lending.
The purchase includes an estimated $970 million in cash and up to 62.5 million units of stock. It adds New York-based Angelo Gordon’s nearly $3 billion in real estate capital available for investing to TPG’s nearly $9 billion, according to CoStar data.
TPG, based in San Francisco and Fort Worth, Texas, invests in real estate while making loans, structuring credit deals and working on buyouts. It has a stake in brokerage giant Cushman & Wakefield and went public in January 2022 with a $10 billion valuation before interest rates began to rise. The move is a significant expansion into credit investing for TPG, adding Angelo Gordon's investing in corporate credit, direct lending, and structured credit.
“The acquisition of Angelo Gordon with a scale credit and real estate businesses is directly on target with our strategic objectives to further diversify and unlock new avenues for growth and innovation, and attractive and complementary asset classes,” said TPG's CEO, Jon Winkelried, said during a conference call Monday.
Angelo Gordon is looking to raise more than $5 billion in new capital for four funds, AG Realty Value Fund XI, AG Asia Realty Fund V, AG Europe Realty Fund IV, and AG Essential Housing Fund II, CoStar data shows. It has bought about $3.2 billion in U.S. properties over the past 24 months, according to CoStar, while TPG has participated in more $2.8 billion in acquisitions in that time.
Angelo Gordon’s $55 billion credit business has expanded its assets under management at a 15% annual rate over the past five years, he added. As a combined company, TPG said, it would have $38 billion of collective real estate assets under management as tallied by year-end 2022 data.
“The combination with Angelo Gordon will expand our current real estate presence in Europe, open new geographies with their business in Asia, broaden our product set to include strategies such as net lease and enhance our global sourcing capabilities," Winkelried said.
TPG has been looking for an opportunity to expand in a meaningful way since its initial public offering, he added.
By launching its stock on the Nasdaq Stock Market, TPG gained access to capital it may not otherwise have had outside public markets. The funds raised in the offering gave TPG, founded as Texas Pacific Group, the ability to expand its business, including its real estate investing.
Diversified Investments
The combined TPG and Angelo Gordon would have $208 billion of assets under management based on year-end 2022 numbers, according to Winkelried.
Upon close of the transaction, TPG will manage assets across a broadly diversified set of investment strategies, including private equity, credit, real estate, and impact investing.
Earlier this month, Angelo Gordon’s co-CEOs noted in a second-quarter capital markets report that recent banking disruptions presented more opportunities in both credit and real estate.
“We believe the ongoing turbulence in the banking sector will lead to a further, sharper reduction in liquidity and credit availability for the real estate financing markets, which is likely to spur stressed and distressed real estate investment opportunities,” Josh Baumgarten and Adam Schwartz said.
They added that “in the U.S., the collapse of Silicon Valley Bank and Signature Bank followed by the rescue of Credit Suisse has turned attention to the health of regional and midsize banks. With regional banks now in the spotlight, we expect credit availability to tighten further. This has the potential to create additional challenges, as banks account for approximately 40% of total commercial real estate debt, representing a very significant part of the market ecosystem.”
Upon closing of the transaction, Angelo Gordon is to become a new investment unit within TPG. Baumgarten and Schwartz are set to become co-managing partners of that business, reporting to Winkelried.