UNITED STATES - Principal Real Estate Investors has created a partnership with McCaffery Interests to invest in US retail properties.
Principal is like a lot of major real estate managers in the United States when it comes to investing in retail properties and have a very hard time finding assets on its own so has sought a partnership with specialists to lighten the pressure, said Jim Halliwell is director of acquisitions and dispositions for Principal.
"It makes a great deal of sense for us to team up with a company that focuses on investing in retail properties. This is why we set up the relationship with McCaffery. They have the contacts with retail tenants to make either acquisitions or developments happen for the future. It would be difficult for us to do this by ourselves," said Halliwell.
The amount of retail in Principal's commingled fund - known as the US Property Account - reflects how under-allocated many real estate managers are with retail around the country, as Principal now has just 16% of its assets in the commingled fund in retail but has the capability to expand this to as much as 25%.
Initial assets held by the Principal/McCaffery relationship are six properties in the greater Washington DC area - five of which are neighborhood shopping centres while one is an office building.
Among the retail properties are four neighborhood strip centres - the US equivalent of the European piazza, the key difference being they tend to be built as a long ‘strip' of restaurants and non-grocery related stores - and one grocery-anchored asset, all of which Principal considers to be value-added properties.
"The improvements made to the property will, in some cases, be minor like a change of the facade and in others are a redevelopment or expansion," said Halliwell.
Principal invested in this portfolio for its predominantly core open-ended commingled fund, US Property Account, which had assets under management of $7.6bn, by Q3 2007, however, the fund does allow for a small percentage of its assets to be value-added.
Principal is hoping more transactions will be done with McCaffery in the future but there is no set amount of capital earmarked for the relationship as deals will be considered on a case-by-case basis and both companies must agree on each deal before a closing can occur.
Overall strategy for the partnership is to invest in either neighborhood or lifestyle shopping centres. Transactions will be considered on a nationwide basis.