Prudential RE Investments Closes $430M Property Fund V

By Gail Kalinoski, Contributing Editor

Prudential Real Estate Investors continues to pick up acquisitions through its $430 million U.S. Property Fund V and is looking ahead to more office and multi-family investments for the fund.

“We are very pleased to have reached this level of equity commitments for continued U.S. investments,” David Pahl, senior portfolio manager for PREI, said Wednesday in a prepared statement. “We’re grateful for the tremendous support and confidence our German investors place with us and we are very optimistic about the investment environment over the next several years in the U.S.”

The property fund focuses on office investments in premium locations like Manhattan, Washington, D.C, Boston, and Los Angeles as well as other “next tier” markets. It also makes what it calls minor allocations to apartment development in infill, high-growth markets. The real estate fund, which recently closed with $430 million in commitments, is managed on behalf of German investors.

In its most recent acquisition, the fund bought Rio San Diego, a six-story, 190,000-square-foot office building in the Mission Valley suburb of San Diego, from AEW Capital Management for $56 million. PREI said the price was 20 percent less than a different U.S. Property Fund sold the same property for seven years ago. AEW, which sold it on behalf of an institutional client, was represented by Jones Lang LaSalle. The building at 8594 Rio San Diego Drive, is 92 percent occupied and is located in a strong office submarket.

PREI said U.S. Property Fund V has also acquired Broadstone North Central, a 225-unit residential property in Phoenix through a joint venture with Alliance Residential. The fund has also secured apartment developments in Houston and Dallas. PREI did not provide further details on those acquisitions.

Last year, U.S. Property Fund V made two major investments in two prime office buildings location – 575 Lexington Ave. in Manhattan and 650 California St. in San Francisco. The PREI fund formed an investment group with Normandy Real Estate Partners’ Normandy Real Estate Fund II and New York Life Insurance Co. to buy 575 Lexington Ave., a 743,200-square-foot office tower, for $400 million. The joint venture purchased the property from Metro Fund, a JV between Silverstein Properties and an institutional investor, in October 2012, and is now renovating the building.

The PREI fund also teamed with Tishman Speyer to buy 650 California St., a 34-story, 461,000-square-foot office tower, for a reported $230 million in May 2012, according to the San Francisco Business Times. Curbed.com said this summer that the building is undergoing renovations, including a lobby upgrade, in order to attract more tech tenants.

The office building investments are part of USPV V’s core/core plus strategy, according to PREI. Since the first U.S. Property Fund was created in 1994, more than 80 properties have been acquired with a total investment of more than $3.7 billion for the entire range of funds.