TPG, one of the world's largest alternative asset management firms, has roughly $14 billion in cash to spend and just completed $1.2 billion in real estate investments in the second quarter.
The Fort Worth, Texas-based company described the deployment Tuesday as a cautious step while capital markets wait for an expected lowering of interest rates.
“Over the last few years, we have been anticipating substantial stress in the system to drive attractive investment opportunities, so we were purposely patient in our approach,” Jon Winkelried, CEO of TPG, said on a conference call with Wall Street analysts to discuss earnings. “We expect to lean into the growing number of interesting opportunities we are sourcing in our core areas of focus.”
TPG has a combined cash reserve of about $14 billion across its two primary real estate investing businesses, TPG Real Estate and TPG AG, which it formed last year when it acquired Angelo Gordon.
Among the quarterly highlights within TPG Real Estate, Winkelried noted investments in two office-to-residential conversions in New York City.
“In aggregate, we acquired the properties at a significant discount to their prior basis, and we're working with best-in-class partners to execute these conversions,” he said.
The firm completes its largest acquisitions through TPG Real Estate, targeting capital in chunks ranging from $100 million to $400 million.
“The equity deployment on the [TPG] AG real estate side is more in the range of sort of $25 million to $75 million,” Winkelried said. “We think of it as a kind of a value-add real estate strategy where we're buying assets where we believe we can add value with the partnership with our operating partners and ultimately create value in the portfolio that way.”
The firm sees growing opportunities for both strategies in the back half of the year as a result of the expectation that interest rates will be coming down.
“People are naturally more sort of bullish on what may happen in real estate as a result of that,” he said. “We've seen more of an acceleration of capital more broadly in the market into some of the real estate sectors that perhaps are a bit more defensive. And we're certainly still participating in that, but we're also trying to be very thematic and very careful about where we are deploying.”