PGIM Real Estate piles on retail lending exposure with $292m portfolio financing 

Grocery-anchored centers form the base of a 16-property West Coast retail deal.

PGIM Real Estate is stacking its retail exposure with a $292 million floating rate financing package as part of its US core lending strategy.

The New Jersey-based real estate investment manager provided the loan to Global Retail Investors as part of the acquisition of a West Coast retail portfolio comprising 14 properties across California and a pair of properties in Oregon.

The retail portfolio is primarily made up of grocery-anchored centers and totals more than 2.2 million square feet.

Melissa Farrell, head of debt originations at PGIM Real Estate, said there has been increased enthusiasm around the retail market as fundamentals have improved over the past few years despite the rise in e-commerce and impact of covid-19.

“The bounce back in this sector highlights the temporary nature of the pandemic’s impacts and the significant pent-up retail demand that exists in the market,” Farrell said. “This portfolio has shown resiliency during times of uncertainty, which is representative of the profile of assets that our core lending strategy targets across the US.”

GRI will use the financing to institute a business plan to capitalize on those perceived fundamental improvements, including the targeting of new accretive leasing and long-term extensions for major tenants.

“The acquisition will allow Global Retail Investors to capitalize on the strong market demand for high-end suburban retail space,” said Trevor Arnholt, vice-president at PGIM Real Estate. “The combination of densely populated surrounding suburbs, prime locations with access to major highways, and a strong historical occupancy of over 95 percent made this an attractive investment.”

PGIM Real Estate is not alone in its pursuit of more lending opportunities on grocery-anchored retail assets, though the increased competition has caused some saturation in the eyes of industry peers.

Will Pattison, head of the real estate research and strategy team at MetLife Investment Management, said the New York-based insurer-backed investment manager is a bit negative on grocery-anchored retail – not because the fundamentals are poor – but because investors are getting aggressive in the pricing. Pattison said e-grocery is also a real and growing subsector, and MetLife does not think it is getting priced in today.

Retail as a whole has seen signs of revival this year following the first year of covid-19 in the US in 2020. Real Capital Analytics data showed 2021 deal volume alone in the retail sector increased 88 percent year-on-year, ending the 12-month span at $76.9 billion.