Prudential to sell $1bn of assets during 2009

Prudential Real Estate Investors chief Allen Smith said the firm would look to sell in ‘excess of $1bn’ of US properties this year to boost liquidity in its funds. The CEO added that there were ‘encouraging signs’ in the transactions market with some properties attracting high prices and some a high volume of bids.

Prudential Real Estate Investors will sell more than $1 billion of properties in the US during the course of 2009, according to chief executive officer Allen Smith.

The Parsippany, New Jersey-based fund manager will sell the assets to ease liquidity issues in some of its funds and as part of a general disposition strategy.

Allen said the firm tried to stay in the market selling properties “in good and bad times”. However, speaking during a media briefing today, he added that with fund level liquidity restricted to property cash flow and property sales, most firms would look to sell some assets. PREI will look to dispose of assets across all its platforms, including open and closed-ended vehicles.

Allen added that Prudential’s active participation in the market had resulting in some “encouraging signs” in relation to transactions.

Despite historically low trading volumes and a dramatic reduction in available debt financing, the chief executive officer said select property deals valued at more than $100 million had taken place while others had attracted a high number of bids.

One Prudential residential asset, located in a North East US city, attracted 35 bids. “There are some encouraging signs,” Allen said. But he noted that it was “sobering to look ahead” at the scale of real estate debt maturities over the next five years. “There’s a mountain of issues to work through.”

David Durning, senior managing director of Prudential’s Mortgage Capital Company, the commercial mortgage lending arm of the insurance group, said the firm intended to originate up to $4 billion from its general account. Up to $1.5 billion would be focused on debt maturities, but the balance would target new opportunities.

He said over the past six weeks there had been a slight slowdown in the pace of loan refinancing, with investors seemingly less “panicked” than they had been earlier in the year.

“People don’t feel like the bottom is going to fall out of everything, and that maybe there is going to be better, more attractive debt available in 2011 and 2012,” he said. As a result, he added, investors could be asking whether there was a rush to lock in debt refinancing in the near term rather than wait for possibly better deals.