TPG Real Estate, two Canadian pension fund managers and Norway’s sovereign wealth fund have teamed up to make a bet on U.S. grocery-anchored retail valued at $2B.
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TPG is partnering with PSP Investments, La Caisse, Norges Bank Investment Management and others to acquire Echo Realty, a full-service operator of more than 230 retail centers across the Midwest and Southeast. TPG is leading the investor group, which plans to scale the business in existing and new markets, the joint venture announced Friday.
“This transaction reflects our continued focus on reinvesting our capital into resilient, needs-based segments,” Rana Ghorayeb, head of real estate at Quebec-based pension fund La Caisse, said in a release. “By partnering with TPG and other like-minded global institutional partners to acquire Echo, we are strengthening our exposure to high-quality established platforms with attractive fundamentals.”
A sales price wasn’t disclosed, but the buyers said the transaction valued Echo at roughly $2B.
TPG, a private equity firm with $306B in assets under management, plans to partner with Echo’s existing management team to build out the full-service landlord’s platforms, including its leasing and property management business and Echo Retail, its boutique retail brokerage.
Simon Marc, senior vice president at Canadian pension fund manager PSP Investments, said the transaction fit within its model of partnering with leading global operators to deploy capital at scale into needs-based sectors.
The primary investors behind the deal are rounded out by Norges, Norway’s sovereign wealth fund and a major investor in U.S. commercial real estate.
Echo’s portfolio includes retail centers anchored by grocery tenants Giant Eagle, Publix, Harris Teeter, Safeway, Acme Markets and Whole Foods. Other properties have convenience store anchors like Alimentation Couche-Tard’s GetGo brand.
Echo has developed more than 16M SF of retail space along the East Coast and in the Midwest. It is focused on properties anchored by the dominant grocer in markets east of the Mississippi River, with a minimum investment of $15M, according to its website.
Grocery-anchored real estate has become a popular target for private capital, including other giants like Blackstone. In December, the firm partnered with San Francisco-based DivcoWest and a local investment firm to acquire Alexander & Baldwin, a publicly traded REIT and the largest owner of grocery-anchored shopping centers in Hawaii, at a $2.3B valuation.
That same month, Bain Capital Real Estate and 11North announced they had raised $1.6B for a fund targeting grocery-anchored retail.
Echo’s acquisition by a group that includes two Canadian investment giants comes as the long-flowing stream of capital into the United States from its northern neighbor faces strain.
Canada-to-U.S. commercial real estate deal flow was down 32% year-over-year to $5B in the year that ended in March, while overall investment outside of the country remained stable, according to Colliers’ Global Capital Flows report. Canadian firms spent 37% of international capital allocations on U.S. assets in the last year, down from 54% the prior year.
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