TEP packs 98 federal leases into one $450 million stack

Tanenbaum Equity Partners, the Dallas firm that specializes in buying buildings leased to governments, has completed a $450 million recapitalization of TEP Government Holdings, its nationwide portfolio of federal-tenant real estate, with Centennial Bank senior debt and Eagle Point Credit Management preferred equity layered over common equity that stays with the firm's principals. The recapitalization collapses what had been multiple property-level financings into a single capital stack, taking a series of refinancing dates off the table and turning 98 buildings into one credit. CEO Sunny Sajnani calls the long-term structure the foundation for the next stage of the acquisition program.

The portfolio itself spans roughly 1.6 million square feet across 24 states, with 30 federal agencies as the primary tenants, and those occupants are the investment thesis in themselves: government leases have long drawn institutions because the credits are investment grade and the terms run long, and here the federal government is effectively the entire tenant roster. Sajnani describes the book, assembled over a decade, as one of the largest privately owned federal-lease portfolios in the country.

Instead of underwriting the leasing odds of any individual property, Centennial Bank and Eagle Point are underwriting the appropriations stream behind a large, diversified group of government leases, a distinction that matters for pricing. The preferred layer is telling, too: private credit has become a standard source of gap capital for owners avoiding asset sales or expensive common equity, and a diversified federal lease book gives a preferred investor a clearer view of future rent than most real estate does. Eagle Point, a credit manager with $13.2 billion in regulatory assets, fits that bill, and the yield on its preferred equity is effectively being priced against federal appropriations rather than a corporate tenant's quarterly performance.

The consequence sits in the financing market, where sponsors nursing federal-lease portfolios one loan at a time may be pricing in more risk than the tenant roster deserves, because the capital markets have now shown those buildings can be financed whole. The next test is whether TEP puts the refreshed balance sheet to work on acquisitions, turning a recapitalization into a template.