Key team members: David Harpum – chief legal officer; Claire Manches – vice president corporate counsel, lead counsel for PGIM European debt team; Andrew Elliott – chief counsel, Europe and Asia Pacific; Tanya Etheridge – vice president, corporate counsel; Mark Fitzpatrick – secondee

What are the most significant cases and transactions that your legal team has recently been involved in?

Some of our significant cases and transactions are below:

Savills NWLP Tranche A & B – Acquisition financing of four newly built adjacent industrial assets in Northwest Logistics Park located in Ballycoolin, Dublin 15. PGIM provided a 50% LTPP, ten-year, fixed rate interest-only loan of €23.95m. The sponsor (Savills IM) initially acquired three of the four assets, with acquisition of the fourth asset taking place in 2Q 2022 upon PC of that asset. As a result, PGIM’s loan was structured in two tranches (A & B), with funding of Tranche A to occur in July 2021 and the funding of Tranche B at PC of the fourth asset in 2Q 2022. All four assets are cross-collateralized and cross-defaulted.

Capstan Building – Acquisition financing with Round Hill Capital to purchase a 26 unit BTR asset for €12,750,000m (€490,385/unit). The asset is located in Ashtown, Dublin 15. The loan is €6,517,500m; interest-only; reflecting a 50% Market LTV, for a term of five years.

Grove House – Acquisition financing with Round Hill Capital of another BTR asset in Goatstown, Dublin 14 . Grove House is cross collateralised and cross defaulted with the Capstan Building. The asset is comprised of 19 units and the Sponsor purchased the building for €11.5m. The sponsor purchased the asset using ERIF II IRE PROPCO I Limited, the same entity that owns Capstan which PGIM RE already lends to. The New facility is co-terminus interest only financing, bringing full debt proceeds to €12.2m.

Core Capital – PRECap partnered with Core Capital by committing to provide capital which, when combined with committed sponsor capital, is to be utilised to acquire Zurich House, a 37k sq ft office in Ballsbridge, Dublin 4, Ireland. When further combined with third-party senior debt financing, is to be utilised to redevelop the property into a new Grade A 116k sq ft office.

Also, in terms of commitment to Ireland we run our 12 strong servicing team out of an office in Letterkenny so all our loan servicing is done from Ireland.

What has been the number one challenge that has impacted you over the past year?

Pricing and understanding the economics of the debt market has been a real challenge for the team but for the legal team directly, I think it has been coping with the raft of ESG legislation and changing landscape for our funds.

Has the increasing consciousness of climate change and sustainability affected your company and the team’s priorities, and if so how?

The answer is a definite “Yes” and significantly. We are aware that there are huge risks for our portfolio if we don’t get our commitment to ESG right. The buildings we invest in and lend on will lose value and become stranded assets. There are also wider threats for the planet and in our industry we need to take these very seriously as the real estate industry is the largest contributor to climate change. Buildings make up 28% of the global energy-related CO2 emissions by sector and 30% of the share of global final energy consumption by sector. If you add in construction too then buildings and construction make up 39% of the global energy-related CO2 emissions by sector and 36% of the share of global final energy consumption by sector.

Our most important stakeholders are now holding real estate as an industry accountable. Our employees and our building occupants and borrowers want to see us take action and this creates an opportunity for us to have a mission.

We have changed our template documents and our funds objectives to reflect ESG credentials. PGIM have accelerated efforts to significantly mitigate our impact on the environment by creating a multi-year plan for our assets, which includes deep energy retrofits, on- and off-site renewable energy and green utility power. To give one specific example, in May 2021, PGIM Real Estate became a signatory to ULI Greenprint’s Net Zero by 2050 Goal which aims to achieve net zero operational carbon by 2050 across all managed assets. The goal is designed to accelerate the reduction of carbon emissions produced by buildings under operational control at all stages.

Given our global scale and footprint, we recognise that we have a significant opportunity to make a positive impact. We’re committed to being a part of the solution by helping the world address our biggest climate challenges.