TPG Real Estate announced the acquisition of a high-yielding loan portfolio from the Germany-based Deutsche Bank AG’s (DB) Special Situations Group. The former will own 75% stake in the $2.5 billion portfolio, while the latter retains the remaining 25%.
For the purpose of the acquisition, a new REIT, under the name TPG Real Estate Finance Trust (TRT), has been formed which will include 11 origination and risk-management professionals from Deutsche Bank’s Special Situations Group.
The REIT will not only own the existing portfolio, but will also help in origination of new loans for both existing and new borrowers. Notably, to aid the origination, TRT has raised more than $750 million as equity capital from institutional investors.
Deutsche Bank’s well-diversified product line and expertise, combined with TPG’s brand value and experience, will help the company to enhance client experience. Moreover, TPG believes that the new platform will augment its customer base, given the increasing demand for financing.
The loan portfolio comprises 57 performing first mortgage loans on properties including office, apartment, hotel, condominium and industry assets, mainly in the gateway markets of New York and Los Angeles. These loans, with an average loan size of $40 million, have a weighted average life of less than three years and are backed by commercial real estate assets in transition. Additional terms of the merger remain undisclosed.
The U.S. commercial real estate activity is expected to be firm in 2015 owing to job growth. Also, vacancy rates across office, industrial and retail markets are expected to decline with an estimated favorable increase in rents relating to the same.
Deutsche Bank, which has retained its stake in the loan portfolio, is in a position to enjoy the anticipated upside in the retail estate activity. Moreover, the company seeks to post profit from the sale, according to a Wall Street Journal report.
Deutsche Bank carries a Zacks Rank #5 (Strong Sell). Some better-ranked foreign banks include UK-based Barclays PLC (BCS), Chile-based CorpBanca (BCA) and Argentina-Grupo Financiero Galicia S.A. (GGAL), each sporting a Zacks Rank #1 (Strong Buy).
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