Partners Group in US industrial preferred equity deal
UNITED STATES - Partners Group has taken a preferred equity stake in Garland Business Park, an industrial asset in Dallas, Texas - identified by the group as one of the strongest regional economies in the US.
The group described the $17.5m (€14.3m) asset in a statement as "quality real estate leased to a diverse group of creditworthy tenants in a strong location with positive economic momentum".
Mike Zeto, vice-president in the private real estate team, told IP Real Estate preferred equity offered Partners Group a combination of downside protection and decision-making rights that would not have been available with a straightforward debt investment.
"The advantage of preferred equity compared with more typical debt structures is that it gives us an opportunity to share in the potential equity upside," he said.
"It also gives us an opportunity for equity-like decision rights while still providing downside protection from a preferred position in the capital structure."
As a preferred equity investor, the €25bn Partners Group will take priority over Dallas-based operator Westmount Realty Capital - in contrast to common equity deals, where the investors would be pari passu.
The equity upside in this case would likely arise in the form of active management to reduce vacancies and bring rents up to market rates.
Zito did not rule out further preferred equity deals, along with common equity investments. "It isn't as typical as common equity or debt, but this isn't our first preferred equity investment," he said. "It depends on what the available opportunities available. But, yes, we do have an appetite to do more."