Prudential Mortgage Provides Financing for 4 West Coast Shopping Centers

Prudential Mortgage Capital has given a developer a financial boost.
Liz Velazquez Prudential Mortgage Capital Co.

Elizabeth Velazquez, Prudential

Donahue Schriber Realty Group recently snapped up four Class A grocery-anchored shopping centers totaling 666,000 square feet in California and Washington with the assistance of Prudential Mortgage Capital Co. Prudential came through for the real estate company with financing totaling $118.5 million.

In Northern California, Donahue acquired from separate sellers the 91,200-square-foot Gilman District Berkeley in Berkeley, and the 320,000-square-foot Village Oaks in San Jose. In Washington, the company purchased Lakeland Town Center, a 125,400-square-foot retail center in Auburn, and the 129,200-square-foot Westgate North in Tacoma. The properties are anchored by such leading grocers as Whole Foods, Safeway and Haggen. Prudential found more than a few good reasons to provide Donahue Schriber with four 10-year fixed-rate loans.

“Clearly the strong sponsorship of Donahue Schriber was as key factor,” Elizabeth Velazquez, a director with Prudential, told Commercial Property Executive. “They have 45 years of experience developing, managing and acquiring neighborhood community centers such as these, so they’re very experienced in this space and it gives us a lot of comfort to have a sponsor like that as a borrower.”

The high quality of the properties also caught Prudential’s eye, as did their solid occupancy levels and locations in areas with high average household income, strong population density and robust traffic count. The retailers anchoring the shopping centers also played a role. Not only is a large percentage of the portfolio home to investment grade tenants,  the assets also feature strong shadow tenants that, while not part of the collateral, attract even more traffic. And there’s more.

“Another thing that was really appealing is that this is a cross-collateralized portfolio, so we have additional diversification of risk and volatility across the assets, the tenants and the submarkets,” Velazquez added.

In terms of the lending community’s response to various sectors of commercial real estate, retail has become increasingly attractive over the past few years. Assets like those Donahue Schriber just acquired are considered particularly desirable. Velazquez noted, “In the retail space, grocery-anchored retail is the preferred asset class, given their nature. They seem to be somewhat protected–in downturns, people still need to go out and purchase groceries, they need to pick up prescriptions at the drugstore and they continue to purchase everyday items.”

While the retail sector has certainly moved up in the ranks, it’s still not on par with multi-family in the eyes of lenders. “Multi-family is still considered the lowest beta asset class, meaning it has the lowest volatility in terms of values and year-over-year comparison. I would say there’s still a very strong focus in originating loans for multi-family,” concluded Velazquez.

Prudential is keen on most sectors of commercial real estate. In 2014, the commercial and multifamily mortgage finance business provided $15.2 billion in financing, surpassing its projected goal of $14 billion. And earlier this year, Prudential announced that it would make as much as $15 billion available for financing in 2015.