NEWARK, N.J.–PGIM Real Estate Finance closed more than $1.2 billion in commercial mortgage loans within the sector through the first half of 2017 as e-commerce continues to drive industrial development.
The loans include transactions in the U.S., the U.K. and Australia, representing about a third of the company’s originations through June 30.
“We have been attracted to industrial for many years—well before the rise of e-commerce—because the asset class minimizes volatility and offers diversity, often in the form of cross-collateralized pools of multiple properties that vary in terms of tenants and even geography,” said Marcia Diaz, head of originations for PGIM Real Estate Finance.
PGIM Real Estate Finance is a business of PGIM, the $1 trillion global investment management businesses of Prudential Financial, Inc. (NYSE: PRU). Its industrial portfolio includes big warehouses for light manufacturing, inventory storage and, increasingly, online retail fulfillment centers. About 17 percent of the company’s portfolio is invested in industrial properties in the U.S. and nine countries around the world, representing PGIM Real Estate Finance’s most global asset class.
“The industrial sector’s strong performance comes at the expense of retail, but the lines have blurred as industrial players look to find sites close to consumers,” said Christine Haskins, a managing director with PGIM Real Estate Finance.
Several factors combine to make the asset class less volatile than others, including low capital requirement for re-tenanting, a shorter development cycle and the generic nature of the buildings. The run of transactions in 2017 follows some of the most significant transactions in 2016, including a $271 million financing for an industrial portfolio in Mexico and the $92 million financing for the Bardon Logistics Facility in the U.K., which illustrates the impact of Amazon’s growth strategy on the industrial sector. The Mexican portfolio comprises 32 properties across four major markets in Mexico, and, in the U.K., the new fulfillment center puts Amazon within a four-hour’s drive of 90 percent of the U.K.’s population.
Among key transactions so far in 2017:
- A refinancing in Australia for a portfolio of 36 properties through a partnership with two Australian Banks to provide fixed and floating rate loans on a pari passu basis. Eighty-nine percent of the portfolio is in Melbourne, Brisbane or Sydney, and, combined, it is 95 percent leased to more than 65 tenants.
- A $326.5 million loan for a portfolio of 37 properties across 12 markets in the United States. The portfolio of 66 buildings comprises 7.6 million square feet that are leased by 235 tenants.
- A $90 million 10-month forward commitment on eight properties in Chino, Calif. The properties are 100 percent occupied.
For the second half of 2017, PGIM Real Estate Finance has a healthy pipeline of industrial projects throughout North America, Asia and Europe and continues to have a healthy appetite for commercial mortgages across all asset classes.