TMG JV Seeks Some $625M in Value-Add Opportunities
The venture will seek to acquire Bay Area value-add and opportunistic investments in office, R&D, residential and mixed-use, and the infusion means it can respond to those opportunities with remarkable speed.
SAN FRANCISCO—TMG Partners recently announced the closing of a $220 million separate account to invest in value-add commercial real estate in the Bay Area. The capital was sourced from a single institutional investor and represents TMG’s second venture with this investor.
“This separate account follows a successful $165 million venture we formed with this investor four years ago,” said Michael Covarrubias, chairman and CEO of TMG Partners. “We’re grateful for the trust and confidence our capital partner continues to place in the TMG team and in our deployment of the account.”
The venture will seek to acquire approximately $625 million of value-add and opportunistic investments in the Bay Area. Product types will include office, R&D, residential and mixed use.
“The Bay Area remains the country’s most competitive real estate investment market,” said Matt Field, TMG Partners’ president. “This capital will allow us to continue as a market leader and respond to opportunities with remarkable speed.”
Investments in the first separate account included two office buildings and a development site in Oakland, and an office property in San Jose, three of which were sourced off market. The first Oakland investment and the San Jose property were sold during the past year following completion of renovations and signing long-term leases with a number of tenants, including Google, Oracle, Arup, Clovis Oncology and Santa Clara County.
“The investment enhances our flexibility to expand over future cycles, including allowing for more robust financial dexterity during a downturn in order to take advantage of buying opportunities,” Covarrubias tells GlobeSt.com. “And we’re pleased to have just announced our Telegraph Tower project in Oakland which resulted from our first JV with this partner.”
The overall vacancy rate for office product along the Interstate 80/880 Corridor has remained essentially unchanged at 6.1% for the first three quarters of 2019, according to a report by Colliers International. There is an underlying potential for the vacancy rate to increase to 6.9% by the end of the first quarter of 2020 when properties currently under construction are expected to come online. Colliers expects portions of those spaces to pre-lease, thus vacancy is not expected to climb much higher than 6.5% through the first quarter of next year.