REAL ESTATE NEWS

Phillips Edison & Company (PECO) has expanded its partnership with Northwestern Mutual by 10 years on grocery-anchored centers, anticipating creating a portfolio that's valued at roughly $1.2 billion in assets under management. This speaks to the value grocery is providing to properties, with Phillips Edison already noting that the venture has led to "durable fee revenue generated."

The partnership, operating Grocery Retail Partners I LLC, plans to acquire 13 high-quality shopping centers operated by Phillips Edison at a value of roughly $377.5 million.

Additionally, the shopping center operator said that the move will allow it to fund future purchases, with Phillips Edison announcing that it's updating guidance, projecting that it will make between $600 and $700 million in acquisitions on a gross basis during 2026. It also forecasts that it will contribute between $200 million and $250 million to joint ventures.

By the time the Grocery Retail Partners JV is completed, the holdings are expected to include over 40 shopping centers in 17 states, representing roughly $1.2 billion of assets under management.

Platform and Financial Flexibility

For Phillips Edison, the JV expansion tells us two things. One, the Cincinnati-based firm said that its operating platform is in a strong position with capital generation.

This gives it the flexibility to play more offense.

"In addition to the durable fee revenue generated, this expanded joint venture advances PECO's capital allocation strategy by monetizing value from high-quality, stabilized assets and redeploying that capital into grocery-anchored and Everyday Retail™ opportunities with strong growth potential," Jeff Edison, chairman and CEO of the company, said in a statement.

"PECO's joint venture partnerships play a key role in our long-term growth and commitment to delivering stakeholder value. We're able to do this while maintaining balance sheet strength and a disciplined approach to investing that have always defined PECO."

In 2026, the company is calling for 6.3 percent Nareit FFO per diluted share growth, a 6.2 percent increase in Core FFO per diluted share and an NOI gain of 3.7 percent.

Grocery Resilience

The other is the overall strength of grocery today. A recent Cushman & Wakefield analysis ranked the sector at the top of the list among the strongest property subtype performers in terms of sales volume.

Grocery on the list joins post-2010 bulk distribution facilities, suburban luxury apartments, CBD and urban luxury apartments, medical office, strip centers, light industrial and pre-2000 light industrial.

Grocery anchors benefit from fulfilling daily consumer needs.

The expansion of the JV for Phillips Edison reiterates its confidence in grocery-anchored properties, with balance sheet flexibility allowing the firm to double down.

The volume and length under the revised partnership may change — but how it's structured from an equity standpoint doesn't. Northwestern will continue owning the vast majority (86 percent) of Grocery Retail Partners, with Phillips Edison having a 14 percent stake while providing leasing, property and asset management services in the portfolio.

Northwestern has been a force across the real estate market, where it commands investment holdings that exceed $60 billion.

Source: GlobeSt/ALM