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Debt & Equity Retail

PECO joins $400M shopping center JV

In the largest shopping center recapitalization of the year Phillips Edison & Company (PECO) has formed a $414.5 million joint venture with Northwestern Mutual for 20 retail centers.

Northwestern Mutual, one of the largest commercial real estate mortgage and equity investors in the nation, will invest in the grocery-anchored shopping centers currently owned by PECO across three states. Holliday Fenoglio Fowle (HFF) acted as exclusive financial advisor to PECO in forming Grocery Retail Partners I (GRP I) and Grocery Retail Partners II (GRP II),.

Under the terms of GRP I, Northwestern Mutual acquired an 85 percent interest in a 17-center portfolio, which is currently valued at $368 million.

PECO maintained 15 percent ownership in the portfolio while providing asset and property management services for the joint venture.

The proceeds from GRP I will be deployed by PECO to delever its balance sheet, fund redevelopment projects and further expand its portfolio of grocery-anchored centers.

Under the terms of GRP II, Northwestern Mutual acquired a 90-percent interest in three shopping centers valued at approximately $46.5 million, and PECO III maintained a 10 percent ownership in the portfolio.

PECO will continue to provide asset and property management services for the properties.

“Investing in grocery-anchored real estate alongside a well-respected institutional investor like Northwestern Mutual, which has over 150 years of commercial real estate experience, is a meaningful affirmation of the robust fundamentals in our sector,” commented Jeff Edison, chairman of PECO.

“The capital provided by this joint venture gives us the ability to accelerate growth in our portfolio while we are still in the early stages of our development.”

Rob Francour, portfolio director of commercial real estate acquisitions at Northwestern Mutual added: “The advantages of the PECO joint venture are two-fold: first, we have the opportunity to invest in well-located grocery-anchored real estate, and second, we gain access to PECO’s fully-integrated operating platform and their experienced management team. Together, we believe this venture will be mutually beneficial over the long-term.”

HFF acted as exclusive financial advisor to PECO III, which is a REIT sponsored and managed by PECO,
The HFF equity placement team included senior managing directors Steve Hentschel and Danny Finkle and senior director Sheheryar Hafeez along with senior managing directors Michael Joseph and Doug Bond.

“The formation of the JVs between Northwestern Mutualand PECO reaffirms the high-quality nature of its grocery-anchored shopping center portfolio and validates the strength of PECO’s best-in-class platform,” Hentschel said.

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