PGIM Real Estate has provided $1.3 billion in core plus and high-yield financing this year, GlobeSt.com has learned exclusively. The milestone includes 19 transactions across the US, ranging from $12 million to $330 million in a variety of different asset classes.
“As cap rates have compressed, borrowers are increasingly seeking out core-plus and value-add real estate strategies because they see a greater ability to meet their return targets in those areas versus in the core space,” Marcia Diaz, PGIM Real Estate’s Head of U.S. Debt Originations, tells GlobeSt.com. “PGIM Real Estate has been able to respond to this borrower demand with the increased amount of capital we have available to deploy through our core-plus and high-yield products – accompanied by our increased risk appetite and ability to accommodate flexible borrower requirements.”
The last year has been marked by tremendous uncertainty, but the firm says that it was able to provide assurance to clients, which helped to drive the strong activity. “Our own lending activity has also been driven by our clients’ recognition of PGIM Real Estate’s certainty of execution—which is especially critical for borrowers seeking acquisition loans—as well as their trust in our firm’s asset management experience. We also benefit from a wide geographic footprint in the U.S., lending across all property types throughout the top 50 MSAs,” says Diaz.
The activity includes some impressive deals, like a $100 million bridge loan to Invesco Advisers for the acquisition and lease-up of the North and South Loop Center, a six-property life science portfolio, and a $40 million floating rate bridge loan for the Downtown Denver multifamily lofts. According to Diaz, borrowers post-pandemic have needed more flexibility built into these deals. “With cap rates compressing, many borrowers have been looking for more leverage in addition to seeking maximum flexibility,” she says.
The deal activity underscores the strength of the current recovery. “The real estate market has been all systems go, with strong fundamentals and a recovery that has been faster than initially anticipated,” says Diaz. “In the core-plus and high-yield lending space, multifamily and industrial continue to be the favored asset classes that have fueled the market since the beginning of the pandemic, but we have been taking a broader approach to lending that has also included sectors like self-storage, life sciences, and select office. We’re especially looking at geographic markets in the U.S. where growth is projected, but will consider any market with strong fundamentals.”
In the second half of the year, Diaz expects equally strong demand and lending activity in the core-plus and high-yield space. She says, “Our own deal pipeline is strong and we expect to continue our core-plus momentum in addition to completing more mezzanine and preferred equity deals.”