JLL: CMBS investors flock back to retail projects

Retail real estate assets that have made it through the past few years or have proposed workable redevelopment plans are getting lots of attention from lenders who have backed away from office projects.

“We continue to see retail in a favorable position for financings as the fundamentals prove to be solid. Retail is now finding liquidity that was otherwise dedicated for other asset classes,” said Scott Aiese, senior managing director of JLL Retail Capital Markets.

JLL reported that it has executed more than $3 billion in retail financings year-to-date, noting that investor interest is strong in viable and well-located retail properties across all sectors—from unanchored strip centers to regional malls.

Deals worked by JLL this year include:

• The $425M refinancing of Miracle Mile Shops in Las Vegas
• The $290 million refinancing of Bergen Town Center in Paramus, N.J.
• The $275 million refinancing of Westfield Galleria at Roseville in California, and
• The $190 million refinancing of Legacy Place in Boston

Regional and local banks remained the most active lenders in retail with 44% of total transactions, followed by life companies at 20%. Commercial mortgage-backed securities lenders have reemerged as an active participant in the retail sector, with large shopping center properties figuring into some of their biggest deals this year according to JLL’s “Q1 2023 Outlook.”

“Despite prevailing challenges in the broader credit markets, liquidity is intact for high-quality real estate across asset types. Retail fundamentals remain very strong on a national level, and as a result, lenders of all types remain active deploying capital into the space,” Brett Paulsrud, co-head of JLL Capital Markets’ Boston office, team member on the Legacy Place refinancing.

Renovations that include multifamily housing developments have been particularly attractive to investors in retail properties, especially in high-growth areas in central Florida and major metros in the state where several vacant Macy’s boxes are being converted into apartment buildings.