Institutions turn to joint ventures for grocery-anchored retail, ICSC report finds

Institutional investors are increasingly turning to joint ventures to build retail exposure, particularly in grocery-anchored shopping centers, according to an Oct. 21 report from ICSC's Commerce + Communities Today. IREI reported the findings on Oct. 22, pointing to recent partnerships involving CBRE Investment Management, Norges Bank Investment Management, Nuveen Real Estate and PSP Investments.

The report ties the interest to supply-and-demand fundamentals in retail and to the prospect of long-term income growth. Investors want operators with expertise in leasing, tenant mix and local markets, which the report says can be critical to a property's performance, while operators gain capital for acquisitions, development and redevelopment.

PRED's records show a $790 million transaction closing Oct. 21 that lists both Nuveen Real Estate and PSP Investments, two of the firms the ICSC report names. The records do not specify the asset type.

Securing joint-venture equity remains difficult amid elevated interest rates, valuation uncertainty and a persistent gap between buyer and seller expectations, according to the ICSC report.

The report also found some institutions are pursuing direct ownership stakes in retail operating companies, seeking greater alignment and access to established management platforms.

The report's operator-focused view echoes the Ares-PSP industrial venture announced in September, where this publication argued returns would be set by what the sourcing platform could find rather than by the size of the check behind it. Retail places the same wager on leasing and tenant mix, decisions made property by property.