Phillips Edison Grocery Center REIT II Forms Value-Add Joint Venture
Phillips Edison Grocery Center REIT II Inc., a publicly registered non-traded real estate investment trust, entered into a joint venture agreement to target opportunistic and value-add investments which are outside of the REIT’s core investment focus.
Phillips Edison Grocery Center REIT II formed the joint venture with an affiliate of TPG Real Estate and PECO Value Added Grocery Manager LLC, a subsidiary of Phillips Edison.
The REIT owns a 20 percent initial equity interest in the joint venture and will contribute $50 million in equity, while TPG Real Estate owns an 80 percent initial equity interest and will contribute $200 million.
Phillips Edison Grocery Center REIT II contributed six grocery-anchored shopping center properties to the joint venture, which are valued at approximately $94.3 million. The REIT and TPG will make initial capital contributions toward the value of the properties, in accordance with their respective ownership percentages, and the balance will be distributed to the REIT by the joint venture.
PECO will manage and conduct the day-to-day operations and affairs of the joint venture. It will receive 15 percent of net operating cash flow distributions after a 10 percent return, and then 22.5 percent after a 15 percent return. PECO will also be entitled to a quarterly asset management fee equal to a percentage of the total investment value of the properties.
The term of the joint venture will expire in seven years, unless extended.
Phillips Edison Grocery Center REIT II invests in grocery-anchored neighborhood shopping centers that have a mix of national and regional retailers selling necessity-based goods and services, in strong demographic markets throughout the United States. The REIT’s portfolio currently consists of 57 properties in 19 states, totaling 6.9 million square feet for an aggregate purchase price of $1 billion. The leased portfolio occupancy rate is 93.7 percent.
