TPG Capital, one of the largest global private equity investment firms will be launching its first real estate investment fund with a target of at least $1 billion. The company expects to start raising capital for the fund by the second quarter of 2013.
A real estate investment fund is a kind of a mutual fund where an entity raises capital by borrowing money from various sources. The fund then invests the money to buy distressed or unprofitable properties, renovates and remodels them and then sells them at a profit. The profits are distributed among the lenders and the members of the entity.
According to the Wall Street Journal, if TPG manages to raise the targeted $1 billion capital, it would be the second largest initial real estate fund, the first being Lehman Brothers, which raised around $1.6 billion in 2001.
Authorities at TPG confirmed the news of the launch but declined to comment any further on the news, reports Reuters.
TPG was already involved in property purchasing. It has been buying large portfolios of buildings and real estate companies with capital pooled in form its stake in TPG private-equity fund and two other partners. Since Kelvin Davis, the head of TPG real estate took over in 2000, the division has been flourishing under his guidance, reports WSJ.
The company has invested in more than 10 real-estate deals worth $2 billion since 2009. More recently, the company just won the bid for Australia's Ingham Poultry Business. TPG group outbid its major rival, Blackstone Group LP. The deal was valued at almost around A$1 billion, reports Reuters.
When Bob Ingham, owner of Ingham enterprises, was asked to comment on the deal, he said:
"An important part of the decision for me was finding a buyer who would ensure that our customers will continue to receive the highest level of service and our employees would be well looked after."
However, operations of the company will continue normally under the leadership of CEO, Kevin McBain. TPG group also said that it would continue to support McBain.
"TPG is privileged to be buying a great Australian business from a great Australian businessman. We look forward to continuing to grow, innovate with and serve the strong and loyal customer base and back the team lead by Kevin McBain," Ben Gray, managing partner of TPG Group said in a statement.