TCI targets $3bn for latest RE fund focusing on first mortgages, senior debt

The firm has raised $3.3bn for real estate loans across its first two funds.

TCI Fund Management is over two-thirds of the way to the target for its latest multi-billion real estate debt fund, according to last month’s meeting materials from Pennsylvania Public School Employees’ Retirement System.

The London-based investment firm has raised $2.1 billion towards its $3 billion target for TCI Real Estate Partners Fund III, which will make first mortgage and senior secured loans of over $250 million backed by commercial real estate in the US and western Europe. PSERS made a $400 million commitment at last month’s meeting.

The 2014-vintage Fund I closed on $1.3 billion, while the 2016-vintage Fund II closed on $2 billion.

The vehicle return target is in line with PSERS’ private credit goal of approximately 10 percent net internal rate of return. Fund III will seek to generate current interest income along with accrued paid-in-kind interest. TCI does not leverage or syndicate any of its loans, the meeting materials indicated.

Some 90 percent of TCI’s loans are first mortgages; mezzanine loans are made only in the rare cases when the junior debt risk is relatively comparable to that of the other first mortgage and senior debt investments the fund would make.

Large cities will be the prime targets for the fund, particularly Boston, Chicago, New York, San Francisco, western Los Angeles, Washington DC, London, Milan, Paris, Rome and Venice, PSERS documents showed.

Christopher Hohn founded TCI after managing a European event-driven portfolio at Perry Capital. The firm oversees The Children’s Investment Master Fund, of which PSERS is also an investor, and the Talos Capital DAC, which is an investment vehicle for a charity Hohn founded, The Children’s Investment Fund Foundation. TCI began investing in real estate loans in 2010.