REAL ESTATE- Principal Real Estate Investors has put together a new joint venture to invest in retail properties in the Southeast region in the US.
The real estate manager will be investing along with its partner, Charlotte, North Carolina-based GVA Lat Purser & Associates. There will be a total of $150m of gross assets invested for the venture.
The equity for the venture was supplied by the general account of Principal Life Insurance Company. There will be around 60% to 65% leverage used for the JV.
John Frandson, director of commercial real estate for Principal, said, “We think that the major markets in the South are showing strong population and income growth. This is significant for retail properties. Lat Purser is a leading player in the region and it would seem logical we would do something with them. One thing that they really bring to the table is the ability to find investment opportunities.”
The venture is setup with Lat Purser being the major deal finder. The company will locate transactions and then bring them back for approval from both Principal and Lat Purser.
There has been one transaction completed for the venture. This was the acquisition of the 58,520 square feet The Shops at Piper Glen in Charlotte, North Carolina.
This is a value-added deal. There are two major tenants in the strip shopping center. Harris Teeter has an empty store but is still paying rent. The grocery story will be leaving the center in the near future. This space will be taken by some more high-end kind of tenants. The other big tenant is CVS/pharmacy. It plans on being in the property for a long time.
The investment strategy for the venture is to look at a variety of transactions. These would include stabilized core assets, the repositioning of existing properties and investing equity into new developments. Principal looks for returns for the JV to be leveraged IRRs in the 10% to 15% range. These yields would be on the higher end for value-added and development deals.
The kinds of retail would include everything except regional malls. The markets that the JV will focus on are Tampa, Orlando and Jacksonville in Florida and the major metropolitan markets in North and South Carolina.