- Institutional investors are using joint ventures to gain exposure to retail, especially grocery-anchored centers, citing supply-and-demand fundamentals and long-term income growth.
- Investors want experienced operators with leasing, tenant-mix and local-market know-how, while operators get capital in return for acquisitions, development and redevelopment.
- JV equity is still hard to raise amid high rates, valuation uncertainty and buyer-seller gaps, so some investors are buying stakes in operating companies instead.
Institutional investors are leaning on joint ventures to build exposure to grocery-anchored shopping centers, according to Institutional Real Estate, which summarized an Oct. 21 ICSC article.
CBRE Investment Management, Norges Bank Investment Management, Nuveen Real Estate and PSP Investments have all been part of recent retail partnerships, a sign of how much interest the sector is drawing.
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Why Investors Want In
The pitch is favorable supply and demand, plus a path to growing income over the long haul.
CRE Daily covered one example this week, when PSP and Nuveen launched a $790M JV to buy open-air centers anchored by grocers and other necessity retailers. The partners have closed about 3M SF across 19 properties in eight states.
What Operators Bring
Investors want seasoned retail operators, because leasing skill, tenant mix and local knowledge shape how a center performs.
Operators, in turn, get capital to fund acquisitions, development and redevelopment.
The Catch
Lining up JV equity is still tough. High rates, murky valuations and bid-ask gaps between buyers and sellers are all in the way.
Some institutions are taking a different route and buying direct stakes in retail operating companies. That gives them closer alignment and a seat on an established management platform.
Why It Matters
Capital is flowing toward operators with proven track records. For grocery-anchored owners, that means partners are choosy even as demand for the product stays strong.
What’s Next
Expect more partnerships built around operators. CRE Daily recently reported that Phillips Edison expanded its grocery-anchored JV with Northwestern.
