Timbercreek targets $1 billion for launch of U.S. debt fund
Timbercreek Asset Management Inc., a Canadian real-estate investment firm with about US$6 billion under management, is launching its biggest U.S. debt fund as it seeks to expand its global lending platform.
Timbercreek is fundraising to attract as much as US$1 billion for a fund in the U.S. that it expects to be active this year, said Bradley Trotter, head of global debt at the Toronto-based firm. The fund will target rental real estate developments and renovations, and be leveraged with an equal split of equity and debt, he said. The equity component will consist of owning limited partner units in the fund.
“We’re early days but we’re getting a lot of positive reception to the strategy and we’re building the pipeline for the fund,” Trotter said in an interview at Blomberg’s Toronto office. Timbercreek is targeting Canadian institutional investors for now, but may look to add international backers in the future, he said.
Timbercreek, which has a debt portfolio of about $2 billion (US$1.6 billion), is looking beyond Canada to expand its global lending strategy. The company’s largest debt vehicle in Canada is run through the publicly traded Timbercreek Financial Corp., while Timbercreek Asset has been seeking opportunities in the U.S. and Europe. The firm made its first moves into Ireland last year with a 200 million euro (US$237 million) fund and is looking to raise another fund for that market of about the same size or more, said Trotter.
Timbercreek is mainly targeting short-term loans for commercial assets under US$25 million that usually evade the attention of larger debt funds and banks, said Trotter, who was formerly head of GE Capital Real Estate in North America. The firm targets so-called value-add opportunities, which involve renovating distressed or mismanaged rental properties.
“Following the financial crisis, you had a lot of rules put into the banks and they’ve all pulled back in their ability to lend on these types of projects,” Trotter said. “You’ve had capital withdrawn from value-add sponsors and so we’ve looked for opportunities around the world where we can take advantages of that.”
Irish Appeal
Ireland was hit hard by the financial crisis, resulting in the nationalization of a lot of bank debt that was subsequently sold off to various private-equity firms, said Cameron Goodnough, chief executive officer of Timbercreek Financial. Today, it’s an attractive market for Timbercreek as the Irish economy is strong. Many Irish owner-operators of real estate companies are buying back the assets, so there’s an opening for lenders to provide capital, he said.
“There’s still a dislocation between the banking system and the market and there’s that much more of a price premium by providing capital as an alternative lender,” Goodnough said. “There’s a lot of value-add opportunities from just tenanting buildings to bringing building to code to repositioning the buildings around Dublin so what we do is a real natural fit.”
The company is looking to raise another fund in Ireland, especially as international interest heats up across Canada, the U.S., Europe and Asia, Goodnough said. “Ten months in, we’re feeling very confident about our ability going forward to continue to raise money and build that platform in Ireland,” he said.
Timbercreek is taking a similar approach to the U.S., looking at secondary markets in cities like Minneapolis, Dallas, Austin, Seattle and Denver that are growing but haven’t necessarily recovered from the financial crisis as quickly as cities like New York.
“We’re continuing to look and expand,” Trotter said.