Northwestern Mutual is participating in what is believed to be the largest U.S. shopping center recapitalization transaction of 2018.
The insurers is teaming up with Phillips Edison & Company Inc. (PECO), a retail real estate investment trust (REIT), to invest in 20 shopping centers that are anchored by grocery stores.
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PECO now owns all of the shopping centers.
Northwestern Mutual will get a stake in the centers by investing in two joint ventures with PECO. The two joint ventures are valued at $414.5 million.
One of the joint ventures is Grocery Retail Partners I (GRP I).
Through an investment in GRP I, Northwestern Mutual will acquire an 85% stake in a portfolio of 17 high-quality shopping centers in eight states. All of the centers, which are now owned by PECO, are anchored by grocery stores.
The 17-center portfolio is valued at $368 million.
PECO will keep a 15% stake in the portfolio. PECO will also provide asset management and property management services for the joint venture. PECO says it will use proceeds from the GRP I joint venture to pay off some of its debt, renovate properties, and buy more grocery-anchored shopping centers.
“Entering into this joint venture with Northwestern Mutual, one of the country’s largest and most experienced commercial real estate investors, is a compelling illustration of the continued strength in grocery-anchored real estate,” Jeff Edison, chairman of PECO, said in a statement. “We are thrilled to be forming a relationship with such a well-respected partner in Northwestern Mutual, and believe this further validates our position as the leading fully integrated operator of grocery-anchored real estate.”
Rob Francour, portfolio director of commercial real estate acquisitions at Northwestern Mutual, said the joint venture with PECO creates an opportunity to invest in a portfolio of “necessity-based retail real estate.” “We’re confident these assets will produce consistent cash flow that complements our current commercial real estate portfolio,” Francour said.
Northwestern Mutual has also entered in a separate joint venture with Phillips Edison Grocery Center REIT III Inc. (PECO III), Grocery Retail Partners II (GRP II).