Singapore’s Temasek Backs $200M Commercial Real Estate Debt Fund With CenterSquare

Singapore state investment giant Temasek Holdings has partnered with US fund manager CenterSquare on a commercial real estate debt vehicle with a target deployment of $200 million.

The fund will invest in high-quality subordinate real estate loans as a continuation of the strategy employed across Pennsylvania-based CenterSquare’s debt fund series, the firm said Monday in a release. The fund family dates to 1999 and has deployed more than $3.7 billion in capital, aiming to generate risk-adjusted, equity-like returns through mezzanine loans and debt-like preferred equity investments, secured mainly by cash-flowing rental assets.

The current higher-rate environment has left many borrowers in need of “gap capital” as loans come due and they are unable to secure the level of refinancing available in the previous lower-rate climate, according to Michael Boxer, managing director for private real estate debt at CenterSquare.

“We believe this creates an excellent opportunity for disciplined investors to earn attractive all-in returns, and we’re excited to expand our relationship with the highly respected Temasek investment team,” said Michael Boxer, managing director for private real estate debt at CenterSquare.

Multi-Family Deal Pipeline

The new vehicle’s first tranche of capital will invest alongside CenterSquare’s most recent debt fund in largely pre-identified deals, according to Monday’s announcement. The strategy will continue to focus on multi-family assets while maintaining flexibility to respond to changing market conditions, CenterSquare said.

Richard Gorsky, also a managing director for private real estate debt at CenterSquare, pointed to several factors making commercial real estate debt attractive, including reconstitution of borrower capital stacks, resetting of asset valuations and favourable fundamentals across residential sub-sectors.

“We are excited to continue our partnership with Temasek, which began in early 2022, and has grown steadily since that time,” Gorsky said. “It is a pleasure working with like-minded, pragmatic capital partners, who have allowed us to continue providing creative solutions for our borrowers.”

The news comes less than two months after US fund manager Nuveen announced the A$400 million ($257.2 million) first closing of its maiden Australia real estate debt strategy with anchor investments from Temasek and Nuveen parent TIAA. That vehicle will focus on institutional senior and junior secured real estate loan investments, primarily in the industrial, logistics and residential sectors.

The latest commitments mark a continuation of a theme after Temasek reached the final closing of a $1.3 billion private credit fund targeting Asia Pacific and agreed to acquire a minority stake in APAC-focused private credit fund manager ADM Capital. Both deals were made last year via the Singaporean giant’s wholly owned asset manager Seviora.

Trendy Asset Class

After the APAC private credit market nearly doubled in size over the last five years, according to data provider Preqin, fund managers have been launching new vehicles to target the asset class, with Australia of particular interest.

In October, private equity major Warburg Pincus revealed its A$490 million commitment to MA Financial Group’s A$1 billion Australian private credit platform targeting the country’s residential real estate sector.

In July, Hong Kong’s Gaw Capital Partners announced a A$500 million partnership with Ray White Capital to invest in and manage private credit opportunities across Australia and New Zealand. The same month, Bloomberg reported that US-based PGIM was raising A$750 million for its first Australian real estate debt fund.