Investment Company Act file number: | 811-23739 | |
Exact name of registrant as specified in charter: | PGIM Private Real Estate Fund, Inc. | |
Address of principal executive offices: | 655 Broad Street, 6th Floor | |
Newark, New Jersey 07102 | ||
Name and address of agent for service: | Andrew R. French | |
655 Broad Street, 6th Floor | ||
Newark, New Jersey 07102 | ||
Registrant’s telephone number, including area code: | 800‑225‑1852 | |
Date of fiscal year end: | 12/31/2022 | |
Date of reporting period: | 12/31/2022 |
3 | ||||
4 | ||||
5 | ||||
Total Returns as of 12/31/22 | ||||
Since Inception (%) | ||||
Class I | ||||
(without sales charges) | -0.12 (11/03/2022) | |||
Class D | ||||
(without sales charges) | -0.16 (11/03/2022) | |||
Class S | ||||
(without sales charges) | -0.24 (11/03/2022) | |||
Class T | ||||
(without sales charges) | -0.24 (11/03/2022) |
Description | Value | |||||||
LONG-TERM INVESTMENTS 97.9% | ||||||||
PRIVATE REAL ESTATE | ||||||||
INVESTMENTS IN NON‑CONSOLIDATED JOINT VENTURES - RETAIL(pp) | ||||||||
East Gate Marketplace, Chantilly, Virginia^ | $ | 22,101,593 | ||||||
Monarch Town Center, Miramar, Florida^ | 26,848,663 | |||||||
TOTAL LONG-TERM INVESTMENTS (cost $48,950,256) | 48,950,256 | |||||||
Shares | ||||||||
SHORT-TERM INVESTMENT 2.2% | ||||||||
AFFILIATED MUTUAL FUND | ||||||||
PGIM Core Ultra Short Bond Fund (cost $1,082,063)(wb) | 1,082,063 | 1,082,063 | ||||||
TOTAL INVESTMENTS 100.1% (cost $50,032,319) | 50,032,319 | |||||||
Liabilities in excess of other assets (0.1)% | (48,094 | ) | ||||||
NET ASSETS 100.0% | $ | 49,984,225 | ||||||
^ | Indicates a Level 3 investment. The aggregate value of Level 3 investments is $48,950,256 and 97.9% of net assets. |
(pp) | The Fund’s contractual ownership in the joint venture prior to the impact of promote structures ranges from 98.5% to 99.0% of the venture. |
(wb) | PGIM Investments LLC, the manager of the Fund, also serves as manager of the PGIM Core Ultra Short Bond Fund. |
Level 1 | Level 2 | Level 3 | ||||||||||
Investments | ||||||||||||
Assets | ||||||||||||
Private Real Estate | ||||||||||||
Investments in Non‑Consolidated Joint Ventures - Retail | $ | — | $— | $ | 48,950,256 |
Level 1 | Level 2 | Level 3 | ||||||||||
Investments (continued) | ||||||||||||
Assets (continued) | ||||||||||||
Short-Term Investment | ||||||||||||
Affiliated Mutual Fund | $ | 1,082,063 | $— | $ | — | |||||||
Total | $ | 1,082,063 | $— | $ | 48,950,256 | |||||||
Private Real Estate Investments in Non‑Consolidated Joint Ventures ‑ Retail | |||||
Balance as of 11/03/22 | $ | — | |||
Realized gain (loss) | — | ||||
Change in unrealized appreciation (depreciation) | — | ||||
Purchases | 48,950,256 | ||||
Sales | — | ||||
Balance as of 12/31/22 | $ | 48,950,256 | |||
Level 3 Investments | Fair Value as of December 31, 2022 | Valuation Approach | Valuation Methodology | Unobservable Inputs | ||||||||||||||||
Private Real Estate | ||||||||||||||||||||
Investments in Non‑Consolidated Joint Ventures - Retail | ||||||||||||||||||||
East Gate Marketplace | $ | 22,101,593 | Market | Cost | Unadjusted Cost | |||||||||||||||
Monarch Town Center | 26,848,663 | Market | Cost | Unadjusted Cost | ||||||||||||||||
$ | 48,950,256 | |||||||||||||||||||
Private Real Estate | ||||
Investments in Non‑Consolidated Joint Ventures - Retail | 97.9 | % | ||
Affiliated Mutual Fund | 2.2 | |||
100.1 | ||||
Liabilities in excess of other assets | (0.1 | ) | ||
100.0 | % | |||
Assets | ||||
Investments at value: | ||||
Unaffiliated investments (cost $48,950,256) | $ | 48,950,256 | ||
Affiliated investments (cost $1,082,063) | 1,082,063 | |||
Cash* | 35,001 | |||
Due from Manager | 130,931 | |||
Prepaid expenses | 48,520 | |||
Total Assets | 50,246,771 | |||
Liabilities | ||||
Professional fees payable | 115,204 | |||
Audit fee payable | 65,000 | |||
Income tax liability | 35,000 | |||
Custodian and accounting fees payable | 29,659 | |||
Accrued expenses and other liabilities | 10,648 | |||
Shareholder reports fee payable | 6,994 | |||
Distribution fee payable | 41 | |||
Total Liabilities | 262,546 | |||
Net Assets | $ | 49,984,225 | ||
Net assets were comprised of: | ||||
Common stock, at par | $ | 2,001 | ||
Paid‑in capital in excess of par | 50,006,232 | |||
Total distributable earnings (loss) | (24,008 | ) | ||
Net assets, December 31, 2022 | $ | 49,984,225 | ||
Class I | ||||||||
Net asset value, offering price and repurchase price per share, | ||||||||
($49,909,363 ÷ 1,998,159 shares of common stock issued and outstanding) | $ | 24.98 | ||||||
Class D | ||||||||
Net asset value, offering price and repurchase price per share, | ||||||||
($24,970 ÷ 1,000 shares of common stock issued and outstanding) | $ | 24.97 | ||||||
Class S | ||||||||
Net asset value, offering price and repurchase price per share, | ||||||||
($24,946 ÷ 1,000 shares of common stock issued and outstanding) | $ | 24.95 | ||||||
Class T | ||||||||
Net asset value and repurchase price per share, | ||||||||
($24,946 ÷ 1,000 shares of common stock issued and outstanding) | $ | 24.95 | ||||||
Maximum sales charges (3.50% of offering price) | 0.90 | |||||||
Maximum offering price to public | $ | 25.85 | ||||||
* | Cash restricted for income tax liability |
Net Investment Income (Loss) | ||||
Affiliated dividend income | $ | 8,407 | ||
Expenses | ||||
Management fee | 64,695 | |||
Distribution fee(a) | 78 | |||
Professional fees | 122,000 | |||
Audit fee | 65,000 | |||
Custodian and accounting fees | 30,292 | |||
Fund data services | 26,122 | |||
Shareholders’ reports | 7,000 | |||
Pricing fees | 5,000 | |||
Transfer agent’s fees and expenses(a) | 2,650 | |||
Miscellaneous | 16,431 | |||
Total expenses | 339,268 | |||
Less: Fee waiver and/or expense reimbursement(a) | (306,853 | ) | ||
Net expenses | 32,415 | |||
Net investment income (loss), before income tax and income tax reimbursement | (24,008 | ) | ||
Income tax expense | 35,000 | |||
Net investment income (loss), after income tax | (59,008 | ) | ||
Less: Income tax reimbursement | (35,000 | ) | ||
Net investment income (loss), after income tax and income tax reimbursement | (24,008 | ) | ||
Net Increase (Decrease) In Net Assets Resulting From Operations | $ | (24,008 | ) | |
* | Commencement of operations. |
(a) | Class specific expenses and waivers were as follows: |
Class I | Class D | Class S | Class T | |||||||||||||
Distribution fee | — | 10 | 34 | 34 | ||||||||||||
Transfer agent’s fees and expenses | 2,500 | 50 | 50 | 50 | ||||||||||||
Fee waiver and/or expense reimbursement | (306,103 | ) | (250 | ) | (250 | ) | (250 | ) |
November 03, 2022* through December 31, 2022 | |||||||||||||||
Increase (Decrease) in Net Assets | |||||||||||||||
Operations | |||||||||||||||
Net investment income (loss), after income tax and income tax reimbursement | $ | (24,008 | ) | ||||||||||||
Net increase (decrease) in net assets resulting from operations | (24,008 | ) | |||||||||||||
Fund share transactions | |||||||||||||||
Net proceeds from shares sold | 48,408,233 | ||||||||||||||
Total increase (decrease) | 48,384,225 | ||||||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 1,600,000 | ||||||||||||||
End of period | $ | 49,984,225 | |||||||||||||
* | Commencement of operations. |
Cash Flows Provided By / (Used For) Operating Activities: | ||||
Net increase (decrease) in net assets resulting from operations | $ | (24,008 | ) | |
Adjustments To Reconcile Net Increase (Decrease) In Net Assets Resulting From Operations To Net Cash Provided By / (Used For) Operating Activities: | ||||
Purchases of long-term portfolio investments | (48,950,256 | ) | ||
Net proceeds (purchases) of short-term portfolio investments | (1,082,063 | ) | ||
(Increase) Decrease In Assets: | ||||
Due from Manager | (130,931 | ) | ||
Prepaid expenses | (48,520 | ) | ||
Increase (Decrease) In Liabilities: | ||||
Professional fees payable | 115,204 | |||
Audit fee payable | 65,000 | |||
Income tax liability | 35,000 | |||
Custodian & accounting fee payable | 29,659 | |||
Accrued expenses and other liabilities | 10,648 | |||
Shareholder reports fee payable | 6,994 | |||
Distribution fee payable | 41 | |||
Total adjustments | (49,949,224 | ) | ||
Net cash provided by (used for) operating activities | (49,973,232 | ) | ||
Cash Flows Provided By (Used For) Financing Activities: | ||||
Proceeds from Fund shares sold | 48,408,233 | |||
Net cash provided by (used for) financing activities | 48,408,233 | |||
Net increase (decrease) in cash and restricted cash | (1,564,999 | ) | ||
Cash and restricted cash at beginning of period | 1,600,000 | |||
Cash And Restricted Cash At End Of Period | $ | 35,001 | ||
* | Commencement of operations. |
Class I Shares | ||||||||||
November 03, 2022(a) through December 31, 2022 | ||||||||||
Per Share Operating Performance(b): | ||||||||||
Net Asset Value, Beginning of Period | $25.00 | |||||||||
Income (loss) from investment operations: | ||||||||||
Net investment income (loss) | (0.02 | ) | ||||||||
Total from investment operations | (0.02 | ) | ||||||||
Net asset value, end of period | $24.98 | |||||||||
Total Return(c): | (0.08 | )% | ||||||||
Ratios/Supplemental Data: | ||||||||||
Net assets, end of period (000) | $49,909 | |||||||||
Average net assets (000) | $39,948 | |||||||||
Ratios to average net assets(d): | ||||||||||
Expenses after waivers and/or expense reimbursement | 0.50 | %(e) | ||||||||
Expenses before waivers and/or expense reimbursement | 3.77 | %(e)(f) | ||||||||
Net investment income (loss) | (0.37 | )%(e) | ||||||||
Portfolio turnover rate(g) | 0 | % |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | Annualized, with the exception of certain non‑recurring expenses. |
(f) | Includes a non‑recurring income tax expense of 0.09% for the period ended December 31, 2022, for which the Manager has reimbursed the Fund. |
(g) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving property investments, short-term investments, certain derivatives and in‑kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
Class D Shares | ||||||||||
November 03, 2022(a) through December 31, 2022 | ||||||||||
Per Share Operating Performance(b): | ||||||||||
Net Asset Value, Beginning of Period | $25.00 | |||||||||
Income (loss) from investment operations: | ||||||||||
Net investment income (loss) | (0.03 | ) | ||||||||
Total from investment operations | (0.03 | ) | ||||||||
Net asset value, end of period | $24.97 | |||||||||
Total Return(c): | (0.12 | )% | ||||||||
Ratios/Supplemental Data: | ||||||||||
Net assets, end of period (000) | $25 | |||||||||
Average net assets (000) | $25 | |||||||||
Ratios to average net assets(d): | ||||||||||
Expenses after waivers and/or expense reimbursement | 0.75 | %(e) | ||||||||
Expenses before waivers and/or expense reimbursement | 5.34 | %(e)(f) | ||||||||
Net investment income (loss) | (0.74 | )%(e) | ||||||||
Portfolio turnover rate(g) | 0 | % |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | Annualized, with the exception of certain non‑recurring expenses. |
(f) | Includes a non‑recurring income tax expense of 0.09% for the period ended December 31, 2022, for which the Manager has reimbursed the Fund. |
(g) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving property investments, short-term investments, certain derivatives and in‑kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
Class S Shares | ||||||||||
November 03, 2022(a) through December 31, 2022 | ||||||||||
Per Share Operating Performance(b): | ||||||||||
Net Asset Value, Beginning of Period | $25.00 | |||||||||
Income (loss) from investment operations: | ||||||||||
Net investment income (loss) | (0.05 | ) | ||||||||
Total from investment operations | (0.05 | ) | ||||||||
Net asset value, end of period | $24.95 | |||||||||
Total Return(c): | (0.20 | )% | ||||||||
Ratios/Supplemental Data: | ||||||||||
Net assets, end of period (000) | $25 | |||||||||
Average net assets (000) | $25 | |||||||||
Ratios to average net assets(d): | ||||||||||
Expenses after waivers and/or expense reimbursement | 1.35 | %(e) | ||||||||
Expenses before waivers and/or expense reimbursement | 5.95 | %(e)(f) | ||||||||
Net investment income (loss) | (1.34 | )%(e) | ||||||||
Portfolio turnover rate(g) | 0 | % |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | Annualized, with the exception of certain non‑recurring expenses. |
(f) | Includes a non‑recurring income tax expense of 0.09% for the period ended December 31, 2022, for which the Manager has reimbursed the Fund. |
(g) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving property investments, short-term investments, certain derivatives and in‑kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
Class T Shares | ||||||||||
November 03, 2022(a) through December 31, 2022 | ||||||||||
Per Share Operating Performance(b): | ||||||||||
Net Asset Value, Beginning of Period | $25.00 | |||||||||
Income (loss) from investment operations: | ||||||||||
Net investment income (loss) | (0.05 | ) | ||||||||
Total from investment operations | (0.05 | ) | ||||||||
Net asset value, end of period | $24.95 | |||||||||
Total Return(c): | (0.20 | )% | ||||||||
Ratios/Supplemental Data: | ||||||||||
Net assets, end of period (000) | $25 | |||||||||
Average net assets (000) | $25 | |||||||||
Ratios to average net assets(d): | ||||||||||
Expenses after waivers and/or expense reimbursement | 1.35 | %(e) | ||||||||
Expenses before waivers and/or expense reimbursement | 5.95 | %(e)(f) | ||||||||
Net investment income (loss) | (1.34 | )%(e) | ||||||||
Portfolio turnover rate(g) | 0 | % |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | Annualized, with the exception of certain non‑recurring expenses. |
(f) | Includes a non‑recurring income tax expense of 0.09% for the period ended December 31, 2022, for which the Manager has reimbursed the Fund. |
(g) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving property investments, short-term investments, certain derivatives and in‑kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
1. | Organization |
2. | Accounting Policies |
Expected Distribution Schedule to Shareholders* | Frequency | |
Net Investment Income | Monthly | |
Short-Term Capital Gains | Annually | |
Long-Term Capital Gains | Annually |
* | Under certain circumstances, the Fund may make more than one distribution of short-term and/or long-term capital gains during a fiscal year. |
3. | Agreements |
Contractual Management Rate | Effective Management Fee, before any waivers and/or expense reimbursements | |
1.00% of average daily net assets | 1.00% |
Class | Gross Distribution Fee | Net Distribution Fee | ||||||||
I | N/A | % | N/A | % | ||||||
D | 0.25 | 0.25 | ||||||||
S | 0.85 | 0.85 | ||||||||
T | 0.85 | 0.85 |
4. | Other Transactions with Affiliates |
5. | Portfolio Securities |
Cost of Purchases | Proceeds from Sales | |||
$48,950,256 | $— |
Value, Beginning of Period | Cost of Purchases | Proceeds from Sales | Change in Unrealized Gain (Loss) | Realized Gain (Loss) | Value, End of Period | Shares, End of Period | Income | |||||||
Short-Term Investments - Affiliated Mutual Fund: | ||||||||||||||
PGIM Core Ultra Short Bond Fund(1)(wb) | ||||||||||||||
$— | $21,963,792 | $20,881,729 | $— | $— | $1,082,063 | 1,082,063 | $8,407 |
(1) | The Fund did not have any capital gain distributions during the reporting period. |
(wb) | PGIM Investments LLC, the manager of the Fund, also serves as manager of the PGIM Core Ultra Short Bond Fund. |
6. | Distributions and Tax Information |
7. | Capital and Ownership |
Class | Number of Shares | |
I | 550,000,000 | |
D | 100,000,000 | |
S | 100,000,000 | |
T | 250,000,000 |
Class | Number of Shares | Percentage of Outstanding Shares | ||||||||
I | 1,998,159 | 100.0 | % | |||||||
D | 1,000 | 100.0 | ||||||||
S | 1,000 | 100.0 | ||||||||
T | 1,000 | 100.0 |
Number of Shareholders | Percentage of Outstanding Shares | |||||||||
Affiliated | 1 | 100.0 | % | |||||||
Unaffiliated | — | — |
Share Class | Shares | Amount | ||||||||
Class I | ||||||||||
Period ended December 31, 2022*: | ||||||||||
Shares sold | 1,998,159 | ** | $ | 48,333,233 | ||||||
Net increase (decrease) in shares outstanding | 1,998,159 | $ | 48,333,233 | |||||||
Class D | ||||||||||
Period ended December 31, 2022*: | ||||||||||
Shares sold | 1,000 | ** | $ | 25,000 | ||||||
Net increase (decrease) in shares outstanding | 1,000 | $ | 25,000 | |||||||
Class S | ||||||||||
Period ended December 31, 2022*: | ||||||||||
Shares sold | 1,000 | ** | $ | 25,000 | ||||||
Net increase (decrease) in shares outstanding | 1,000 | $ | 25,000 | |||||||
Class T | ||||||||||
Period ended December 31, 2022*: | ||||||||||
Shares sold | 1,000 | ** | $ | 25,000 | ||||||
Net increase (decrease) in shares outstanding | 1,000 | $ | 25,000 |
* | Commencement of operations was November 03, 2022. |
** | Includes seed capital. |
8. | Repurchases |
9. | Investments in Non-consolidated Joint Ventures |
East Gate Marketplace* | Monarch Town Center** | Total | |||||||||||||
Balance Sheet: | |||||||||||||||
Assets: | |||||||||||||||
Real estate (cost $109,347,731) | $ | 46,854,287 | $ | 62,493,444 | $ | 109,347,731 | |||||||||
Cash | 889,948 | 235,544 | 1,125,492 | ||||||||||||
Other current assets | 40,779 | 517,598 | 558,377 | ||||||||||||
Total assets | 47,785,014 | 63,246,586 | 111,031,600 | ||||||||||||
Liabilities and equity: | |||||||||||||||
Mortgage notes payable, net | 25,296,086 | 33,500,000 | 58,796,086 | ||||||||||||
Accrued expenses and accounts payable | 128,100 | 2,154,483 | 2,282,583 | ||||||||||||
Tenant security deposits | 98,376 | 125,308 | 223,684 | ||||||||||||
Total liabilities | 25,522,562 | 35,779,791 | 61,302,353 | ||||||||||||
Equity | 22,262,452 | 27,466,795 | 49,729,247 | ||||||||||||
Total liabilities and equity | 47,785,014 | 63,246,586 | 111,031,600 | ||||||||||||
Income Statements: | |||||||||||||||
Revenue | 311,480 | 851,538 | 1,163,018 | ||||||||||||
Expenses | 373,870 | 757,536 | 1,131,406 | ||||||||||||
Net income (loss) | $ | (62,390 | ) | $ | 94,002 | $ | 31,612 |
* | Results of operations are presented for the period November 02, 2022 through December 31, 2022 |
** | Results of operations are presented for the period October 28, 2022 through December 31, 2022 |
10. | Risks of Investing in the Fund |
● | local, state, national or international economic conditions, including market disruptions caused by regional concerns, political upheaval, sovereign debt crises and other factors; |
● | lack of liquidity inherent in the nature of the asset; |
● | reliance on tenants/operators/managers to operate their businesses in a sufficient manner and in compliance with their contractual arrangements with the Fund; |
● | ability and cost to replace a tenant/operator/manager upon default; |
● | property management decisions; |
● | property location and conditions; |
● | property operating costs, including insurance premiums, real estate taxes and maintenance costs; |
● | competition from comparable properties; |
● | the occupancy rate of, and the rental rates charged at, the properties; |
● | leasing market activity; |
● | the ability to collect on a timely basis all rent; |
● | the effects of any bankruptcies or insolvencies; |
● | changes in interest rates and in the availability, cost and terms of mortgage financing; |
● | changes in governmental rules, regulations and fiscal policies; |
● | cost of compliance with applicable federal, state, and local laws and regulations; |
● | acts of nature, including earthquakes, hurricanes and other natural disasters; |
● | climate change and regulations intended to control its impact; |
● | the potential for uninsured or underinsured property losses; and other factors beyond the Fund’s control. |
● | the real estate joint venture partner in an investment could become insolvent or bankrupt; |
● | the joint venture partner will typically have day‑to‑day control over the investment, and the Fund’s rights regarding certain major decisions affecting the ownership of the real estate joint venture and the joint venture property, such as the sale of the property or the making of additional capital contributions for the benefit of the property, will typically be limited. These factors may prevent the Fund from taking actions that are opposed by its real estate joint venture partner; under certain real estate joint venture arrangements, neither party may have the power to unilaterally direct certain activities of the venture and, under certain circumstances, an impasse could result regarding cash distributions, reserves, or a proposed sale or refinancing of the investment, and this impasse could have an adverse impact on the real estate joint venture, which could adversely impact the operations and profitability of the real estate joint venture and/or the amount and timing of distributions the Fund receives from the real estate joint venture; |
● | the real estate joint venture partner may at any time have economic or business interests or goals that are or that become in conflict with the Fund’s business interests or goals, including, for instance, the operation of the properties; |
● | the real estate joint venture partner may be structured differently than the Fund for tax purposes and this could create conflicts of interest; |
● | the Fund will typically rely upon its real estate joint venture partner to manage the day‑to day operations of the real estate joint venture and underlying assets, as well as to prepare financial information for the real estate joint venture and any failure to perform these obligations appropriately may have a negative impact on the Fund’s performance and results of operations; |
● | the real estate joint venture partner may experience a change of control, which could result in new management of the real estate joint venture partner with less experience or conflicting interests to the Fund and be disruptive to the Fund’s business; |
● | the real estate joint venture partner may be in a position to take action contrary to the Fund’s instructions or requests or contrary to the Fund’s policies or objectives; |
● | the terms of the real estate joint ventures could restrict the Fund’s ability to sell or |
transfer its interest to a third party when it desires on advantageous terms, which could result in reduced liquidity; |
● | the Fund or its real estate joint venture partner may have the right to cause the Fund to sell its interest, or acquire its partner’s interest, at a time when the Fund otherwise would not have initiated such a transaction; and |
● | the real estate joint venture partner may not have sufficient personnel or appropriate levels of expertise to adequately support the Fund’s initiatives. |
Independent Directors | ||||||
Name Year of Birth Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held During Past Five Years | Length of Board Service | |||
Morris L. McNair, III 1968 Board Member Portfolios Overseen: 2 | Chairman of SG Credit Partners, Inc. (lower middle market lender) (August 2019- Present); Chief Executive Officer of MidMark Financial Group, Inc. (specialty finance business) (February 2019-Present); formerly, Founding Partner of Virgo Investment Group (middle-market opportunistic private equity fund) (2010-2019); formerly, Investment Professional, Silver Point Capital (2007- 2009); formerly, Senior Managing Director at CIT (2001-2007); formerly, Vice President Wachovia’s Corporate Banking Group (1993-2001). | Trustee, PGIM Private Credit Fund (2022- Present); Director, PGIM Private Real Estate, Inc. (2022-Present); formerly Director, Lease Corporation of America (2013-2022); Director, Lease Corporation of America (2013-Present); formerly, Director, Stonegate Capital (Co- Chairman) (2017-2019); formerly, Director; AgResource Management/ Agrifund (Chairman) (2016-2019); formerly, Director, NOW Account Network Corporation (2014- 2019); formerly, Director, HPF Service (Chairman) (2013-2019); formerly, Director, Zippy Shell Incorporated (Chairman) (2015-2018); formerly, Director, Ygrene Energy Fund (2014-2018). | Since March 2022 |
Independent Directors | ||||||
Name Year of Birth Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held During Past Five Years | Length of Board Service | |||
Mary Lee Schneider 1962 Board Member Portfolios Overseen: 2 | Formerly, President & Chief Executive Officer of SG360° (direct marketing communications) (2015-2018); formerly, President & Chief Executive Officer of Follett Corp. (PreK‑12 Educational Technology & Services) (2012-2015); formerly, President, Digital Solutions & Chief Technology Officer for RR Donnelley (communications company for marketing, commercial printing and related services) (1992-2012); formerly, McGraw Hill’s Business Week Magazine (1987-1992); formerly, Time Warner (1985- 1987). | Trustee, PGIM Private Credit Fund (2022- Present), Director, PGIM Private Real Estate Fund, Inc. (2022-Present), Independent Director, Active International (global corporate trade company that leverages assets for multi-platform media) (2019-Present); Independent Director, The Larry H. Miller Company (holding company comprised of real estate, healthcare, sports/ entertainment and technology investments) (2015-Present); Independent Director, Penn State University’s Board of Trustees (2015-Present); Independent Director, Mercy Home for Boys & Girls’ Leader Council (since 2014-Present). | Since March 2022 | |||
Thomas M. Turpin 1960 Board Member and Independent Chair Portfolios Overseen: 2 | Formerly, Chief Operating Officer at Heitman LLC (global real estate investment firm) (2013-2018); formerly, Chief Operating Officer and Chief Executive Officer of Old Mutual US Asset Management (institutional and retail asset management business) (2002-2010); formerly, Managing Director and Chief Administrative Officer of the Institutional, Retail and Defined Contributions Business; Putnam Investments (1993-1999); formerly, Managing Director and Head of Defined Contribution Plans, Putnam (2000-2001); formerly, Trust Accountant, Financial Analyst, Controller of Institutional group; formerly, Manager, Global Cash and Securities Processing Group The Boston Company (now part of BNY Mellon) (1982-1993). | Trustee, PGIM Private Credit Fund (2022- Present), Director, PGIM Private Real Estate Fund, Inc. (2022-Present), Formerly, Director‑Old Mutual Asset Management Trust Co. (2009-2010); formerly, Trustee‑Old Mutual Advisors Fund II (2008-2010); formerly, Board Member of numerous investment boutiques majority owned by Old Mutual Asset Management (2004-2010). | Since March 2022 |
Interested Director | ||||||
Name Year of Birth Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held During Past Five Years | Length of Board Service | |||
Scott E. Benjamin 1973 Board Member & Vice President Portfolios Overseen: 98 | Executive Vice President (since May 2009) of PGIM Investments LLC; Vice President (since June 2012) of Prudential Investment Management Services LLC; Executive Vice President (since September 2009) of AST Investment Services, Inc.; Senior Vice President of Product Development and Marketing, PGIM Investments (since February 2006); Vice President (since March 2022) of the PGIM Private Real Estate Fund, Inc.; Vice President (since September 2022) of the PGIM Private Credit Fund; formerly Vice President of Product Development and Product Management, PGIM Investments LLC (2003-2006). | None | Since March 2022 |
Fund Officers(a) | ||||
Name Year of Birth Fund Position | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Stuart S. Parker 1962 President | President, Chief Executive Officer, Chief Operating Officer and Officer in Charge of PGIM Investments LLC (formerly known as Prudential Investments LLC) (since January 2012); President and PEO (since March 2022) of the PGIM Private Real Estate Fund, Inc.; President and Principal Executive Officer (since September 2022) of the PGIM Private Credit Fund; formerly Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of PGIM Investments LLC (June 2005-December 2011); Investment Company Institute-Board of Governors (since May 2012). | Since March 2022 | ||
Claudia DiGiacomo 1974 Chief Legal Officer | Chief Legal Officer (since September 2022) of the PGIM Private Credit Fund; Chief Legal Officer (since July 2022) of the PGIM Private Real Estate Fund, Inc.; Chief Legal Officer, Executive Vice President and Secretary of PGIM Investments LLC (since August 2020); Chief Legal Officer of Prudential Mutual Fund Services LLC (since August 2020); Chief Legal Officer of PIFM Holdco, LLC (since August 2020); Vice President and Corporate Counsel (since January 2005) of Prudential; and Corporate Counsel of AST Investment Services, Inc. (since August 2020); formerly Vice President and Assistant Secretary of PGIM Investments LLC (2005- 2020); formerly Associate at Sidley Austin Brown & Wood LLP (1999-2004). | Since July 2022 |
Fund Officers(a) | ||||
Name Year of Birth Fund Position | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Isabelle Sajous 1976 Chief Compliance Officer | Chief Compliance Officer (since April 2022) of the PGIM Funds, Target Funds, PGIM ETF Trust, Advanced Series Trust, The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc., PGIM Global High Yield Fund, Inc., PGIM High Yield Bond Fund, Inc. and PGIM Short Duration High Yield Opportunities Fund; Chief Compliance Officer; Chief Compliance Officer (since March 2022) of the PGIM Private Real Estate Fund, Inc.; Chief Compliance Officer (since September 2022) of the PGIM Private Credit Fund; Vice President, Compliance of PGIM Investments LLC (since December 2020); formerly Director, Compliance (July 2018-December 2020) of Credit Suisse Asset Management LLC, and Vice President, Associate General Counsel and Deputy Chief Compliance Officer of Cramer Rosenthal McGlynn, LLC (August 2014-July 2018). | Since March 2022 | ||
Andrew R. French 1962 Secretary | Vice President (since December 2018) of PGIM Investments LLC; Secretary (since September 2022) of the PGIM Private Credit Fund; Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Vice President and Corporate Counsel (2010-2018) of Prudential; formerly Director and Corporate Counsel (2006-2010) of Prudential; Vice President and Assistant Secretary (since January 2007) of PGIM Investments LLC; Vice President and Assistant Secretary (since January 2007) of Prudential Mutual Fund Services LLC. | Since March 2022 | ||
Melissa Gonzalez 1980 Assistant Secretary | Vice President and Corporate Counsel (since September 2018) of Prudential; Vice President and Assistant Secretary (since August 2020) of PGIM Investments LLC; Assistant Secretary (since September 2022) of the PGIM Private Credit Fund; Assistant Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Director and Corporate Counsel (March 2014-September 2018) of Prudential. | Since March 2022 | ||
Patrick E. McGuinness 1986 Assistant Secretary | Vice President and Assistant Secretary (since August 2020) of PGIM Investments LLC; Director and Corporate Counsel (since February 2017) of Prudential; Assistant Secretary (since September 2022) of the PGIM Private Credit Fund; Assistant Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc. | Since March 2022 | ||
Debra Rubano 1975 Assistant Secretary | Vice President and Corporate Counsel (since November 2020) of Prudential; Assistant Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc; Assistant Secretary (since September 2022) of the PGIM Private Credit Fund; formerly Director and Senior Counsel of Allianz Global Investors U.S. Holdings LLC (2010-2020) and Assistant Secretary of numerous funds in the Allianz fund complex (2015-2020). | Since March 2022 | ||
Kelly A. Coyne 1968 Assistant Secretary | Director, Investment Operations of Prudential Mutual Fund Services LLC (since 2010); Assistant Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc.; Assistant Secretary (since September 2022) of the PGIM Private Credit Fund. | Since March 2022 |
Fund Officers(a) | ||||
Name Year of Birth Fund Position | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Christian J. Kelly 1975 Chief Financial Officer | Vice President, Global Head of Fund Administration of PGIM Investments LLC (since November 2018); Chief Financial Officer (since September 2022) of the PGIM Private Credit Fund; Principal Financial Officer (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly, Treasurer and Principal Accounting Officer (March 2022-July 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Director of Fund Administration of Lord Abbett & Co. LLC (2009-2018), Treasurer and Principal Accounting Officer of the Lord Abbett Family of Funds (2017-2018); Director of Accounting, Avenue Capital Group (2008-2009); Senior Manager, Investment Management Practice of Deloitte & Touche LLP (1998-2007). | Since March 2022 | ||
Elyse M. McLaughlin 1974 Assistant Treasurer | Vice President (since 2017) within PGIM Investments Fund Administration; Treasurer and Principal Accounting Officer (since September 2022) of the PGIM Private Credit Fund; Assistant Treasurer (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Director (2011-2017) within PGIM Investments Fund Administration. | Since March 2022 | ||
Russ Shupak 1973 Treasurer and Principal Accounting Officer | Vice President (since 2017) within PGIM Investments Fund Administration; Treasurer and Principal Accounting Officer (since July 2022) of the PGIM Private Real Estate Fund, Inc.; Assistant Treasurer (since September 2022) of the PGIM Private Credit Fund; formerly Assistant Treasurer (March 2022- July 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Director (2013-2017) within PGIM Investments Fund Administration. | Since March 2022 | ||
Robert W. McCormack 1973 Assistant Treasurer | Vice President (2019) within PGIM Investments Fund Administration; Assistant Treasurer (since March 2022) of the PGIM Private Real Estate Fund, Inc.; Assistant Treasurer (since September 2022) of the PGIM Private Credit Fund; formerly Vice President within Goldman, Sachs & Co. Investment Management Controllers (2008-2016), Assistant Treasurer of Goldman Sachs Family of Funds (2015-2016); formerly Director (2016- 2017) within PGIM Investments Fund Administration. | Since March 2022 |
(a) | Excludes Mr. Benjamin, Interested Director of the Fund, who also serves as Vice President of the Fund. See biography above. |
● | Directors are deemed to be “interested,” as defined in the Investment Company Act, by reason of his or her affiliation with PGIM Investments LLC (“PGIM Investments”) and/or an affiliate of PGIM Investments. |
● | Unless noted otherwise, the address of all Directors and Officers is c/o PGIM Investments LLC, 655 Broad Street, Newark, New Jersey 07102-4410. |
● | Name |
● | address, email address, telephone number, and other contact information |
● | employment and occupation, demographic, income, and financial information |
● | Social Security number |
● | transaction history |
● | medical information for insurance applications |
● | consumer reports from consumer reporting agencies |
● | participant information from organizations that purchase products or services from us for the benefit of their members or employees |
● | video and audio recordings, and biometric data |
● | information gathered from your internet or network activity |
● | normal everyday business purposes, such as providing services to you and administrating your account or policy |
● | business research and analysis |
● | data analytics, modeling, and the deployment of automated tools |
● | marketing products and services of Prudential and other companies that may interest you |
● | detecting and preventing identity theft, fraud, or misuse of your accounts |
● | as required by law |
● | visit us online at: https://www.prudential.com/links/privacy-center |
● | call us at: 1‑877‑248‑4019 |
Privacy Ed 1/2023 | ||
D6021 |
∎ MAIL 655 Broad Street Newark, NJ 07102 | ∎ TELEPHONE (800) 225‑1852 |
PROXY VOTING |
The Board of Directors of the Fund has delegated to the Fund’s subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225‑1852 or by visiting the Securities and Exchange Commission’s website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12‑month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website.The SAI includes additional information about directors of the Registrant and is available, without charge, upon request, and a toll-free (or collect) telephone number and e‑mail address, if any, for shareholders to use to request the SAI. |
DIRECTORS |
Morris L. McNair III ● Mary Lee Schneider ● Thomas M. Turpin ● Scott E. Benjamin |
OFFICERS |
Stuart S. Parker, President ● Christian J. Kelly, Chief Financial Officer ● Claudia DiGiacomo, Chief Legal Officer ● Isabelle Sajous, Chief Compliance Officer ● Andrew R. French, Secretary ● Melissa Gonzalez, Assistant Secretary ● Kelly A. Coyne, Assistant Secretary ● Patrick E. McGuinness, Assistant Secretary ● Debra Rubano, Assistant Secretary ● Russ Shupak, Treasurer and Principal Accounting Officer ● Elyse M. McLaughlin, Assistant Treasurer ● Robert W. McCormack, Assistant Treasurer |
MANAGER | PGIM Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
SUBADVISER | PGIM Real Estate | 655 Broad Street Newark, NJ 07102 | ||
DISTRIBUTOR | Prudential Investment Management Services LLC | 655 Broad Street Newark, NJ 07102 | ||
CUSTODIAN | The Bank of New York Mellon | 240 Greenwich Street New York, NY 10286 | ||
TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | PricewaterhouseCoopers LLP | 300 Madison Avenue New York, NY 10017 | ||
FUND COUNSEL | Simpson Thacher & Bartlett LLP | 425 Lexington Avenue New York, NY 10017 |
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus contains this and other information about the Fund. An investor may obtain the prospectus by calling (800) 225‑1852. The prospectus should be read carefully before investing. |
E‑DELIVERY |
To receive your fund documents online, go to pgim.com/investments/resource/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH DIRECTORS |
Shareholders can communicate directly with the Board of Directors by writing to the Chair of the Board, PGIM Private Real Estate Fund, Inc., PGIM Investments, Attn: Board of Directors, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Director by writing to that Director at the same address. Communications are not screened before being delivered to the addressee. |
AVAILABILITY OF PORTFOLIO HOLDINGS |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N‑PORT. The Fund’s Form N‑PORT filings are available on the Commission’s website at sec.gov. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Directors and is available without charge, upon request, by calling (800) 225‑1852. |
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 and the rules promulgated thereunder that the Fund may purchase, from time to time, its shares at net asset value. |
Mutual Funds and Closed‑End Funds: |
ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
SHARE CLASS | I | D | S | T | ||||||
CUSIP | 69419Y105 | 69419Y204 | 69419Y303 | 69419Y402 |
PPREF/RP EAST GATE HOLDINGS, LLC
AND SUBSIDIARY
CONSOLIDATED AUDITED FINANCIAL STATEMENTS
PERIOD OF NOVEMBER 2, 2022 (INCEPTION)
TO
DECEMBER 31, 2022
PPREF/RP East Gate Holdings, LLC and Subsidiary
Table of Contents
Page | ||||
1 – 2 | ||||
Audited Financial Statements | ||||
3 - 4 | ||||
5 | ||||
6 | ||||
7 | ||||
8 – 13 |
INDEPENDENT AUDITOR’S REPORT
To the Members
PPREF/RP East Gate Holdings, LLC and Subsidiary
Opinion
We have audited the accompanying consolidated financial statements PPREF/RP East Gate Holdings, LLC and Subsidiary, which comprise the Consolidated Balance Sheet as of December 31, 2022, and the related Consolidated Statements of Operations, Members’ Equity and Cash Flows for the period of November 2, 2022 (Inception) to December 31, 2022, and the related notes to the consolidated financial statements.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PPREF/RP East Gate Holdings, LLC and Subsidiary as of December 31, 2022, and the results of its operations and its cash flows for the period of November 2, 2022 to December 31, 2022 in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are required to be independent of PPREF/RP East Gate Holdings, LLC and Subsidiary. and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about PPREF/RP East Gate Holdings, LLC and Subsidiary’s ability to continue as a going concern within one year after the date that the consolidated financial statements are available to be issued.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- 1 -
Misstatements, including omissions, are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
• | Exercise professional judgment and maintain professional skepticism throughout the audit. |
• | Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. |
• | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of PPREF/RP East Gate Holdings, LLC and Subsidiary’s internal control. Accordingly, no such opinion is expressed. |
• | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements. |
• | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about PPREF/RP East Gate Holdings, LLC and Subsidiary’s ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Rockville, Maryland
January 31, 2023
- 2 -
PPREF/RP East Gate Holdings, LLC and Subsidiary
Consolidated Balance Sheet
December 31, 2022 | ||||
Assets | ||||
Investment in real estate | ||||
Building and equipment | $ | 36,531,895 | ||
Less: Accumulated depreciation | (75,066 | ) | ||
Net building and equipment | 36,456,829 | |||
Land | 10,397,458 | |||
Net investment in real estate | 46,854,287 | |||
Other assets | ||||
Cash and cash equivalents | 889,948 | |||
Tenant accounts receivable | 36,775 | |||
Deposits and other assets | 4,004 | |||
Total other assets | 930,727 | |||
Total assets | $ | 47,785,014 |
- 3 -
December 31, 2022 | ||||
Liabilities and Members’ Equity | ||||
Liabilities | ||||
Mortgage payable secured by real estate | $ | 25,626,600 | ||
Less: deferred financing costs, net of accumulated amortization of $11,042 | (330,514 | ) | ||
Mortgage payable, net | $ | 25,296,086 | ||
Other liabilities | ||||
Accrued expenses | 10,858 | |||
Accrued interest | 117,242 | |||
Tenant security deposit liability | 98,376 | |||
Total other liabilities | $ | 226,476 | ||
Total liabilities | 25,522,562 | |||
Commitments and contingencies | - | |||
Members’ equity | 22,262,452 | |||
Total liabilities and members’ equity | $ | 47,785,014 |
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
- 4 -
PPREF/RP East Gate Holdings, LLC and Subsidiary
Consolidated Statement of Operations
Period from November 2, 2022 (Inception) to December 31, 2022 | ||||
Rental revenue | $ | 310,586 | ||
Operating expenses | ||||
Management Fees | 9,671 | |||
Operating and maintenance expenses | 18,019 | |||
Taxes | 25,589 | |||
Total operating expenses | 53,279 | |||
Income from operations | 257,307 | |||
Other income (expenses) | ||||
Interest income | 894 | |||
Interest expense | (245,525 | ) | ||
Depreciation | (75,066 | ) | ||
Total other expenses | (319,697 | ) | ||
Net loss | $ | (62,390 | ) |
The accompany Notes to Consolidated Financial Statements are an integral part of these financial statements.
- 5 -
PPREF/RP East Gate Holdings, LLC and Subsidiary
Consolidated Statement of Members’ Equity
(Investor) LLC | (Operator) Moerka LLC | Total | ||||||||||
Balance, November 2, 2022 (Inception) | $ | - | $ | - | $ | - | ||||||
Contributions | 22,101,594 | 223,248 | 22,324,842 | |||||||||
Net loss | (61,766 | ) | (624 | ) | (62,390 | ) | ||||||
Members’ equity, December 31, 2022 | $ | 22,039,828 | $ | 222,624 | $ | 22,262,452 |
The accompanying Notes to Consolidated Financial Statements are an integal part of the financial statements.
- 6 -
PPREF/RP East Gate Holdings, LLC and Subsidiary
Consolidated Statement of Cash Flows
Period from Novenber 2, 2022 (Inception) to December 31, 2022
| ||||
Cash flows from operating activities | ||||
Net loss | $ | (62,390 | ) | |
Adjustments to reconcile net loss to net cash provided by by operating activities | ||||
Depreciation and amortization | 75,066 | |||
Amortization of deferred financing costs included in interest expense | 11,042 | |||
Increase in | ||||
Tenant accounts receivable | (36,775 | ) | ||
Deposits and other assets | (4,004 | ) | ||
Increase in | ||||
Accrued expenses | 10,858 | |||
Accrued interest | 117,242 | |||
Tenant security deposit liability | 98,376 | |||
Net cash provided by operating activities | 209,415 | |||
Cash flows from investing activities | ||||
Purchase of building and land | (21,302,753 | ) | ||
Cash flows from financing activities | ||||
Deferred financing costs | (341,556 | ) | ||
Contributions | 22,324,842 | |||
Net cash provided by financing activities | 21,983,286 | |||
Net change in cash and cash equivalents | 889,948 | |||
Cash and cash equivalents at inception | - | |||
Cash and cash equivalents at end of year | $ | 889,948 | ||
Supplemental information: | ||||
Interest paid | $ | 121,150 | ||
Noncash transactions: | ||||
Building and land purchase financed with debt | $ | 25,626,600 |
The accompanying Notes to Consolidated Financial Statements are an integral part of the financials statements.
- 7 -
PPREF/RP East Gate Holdings, LLC and Subsidiary
Notes to Consolidated Financial Statements for the period of November 2, 2022 (Inception) to December 31, 2022
Note 1 - Organization and significant accounting policies
Organization
PPREF/RP East Gate Holdings, LLC (“Company”) was formed on November 2, 2022 under the laws of the state of Delaware, for the purpose of purchasing, managing and operating a retail rental development located in Chantilly, Virginia. The property consists of 116,032 square feet of retail rental space and pad sites and currently has 21 tenants. The Company has two members, the Investor Member who is the 99% capital owner and the Operator Member, who is the 1% capital owner.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of PPREF/RP East Gate Holdings, LLC and PPREF/RP East Gate LLC, which is a wholly owned subsidiary of RPP II JV LLC. Intercompany transactions have been eliminated in consolidation.
Contributions
The members are required to fund “Initial Capital Contributions” as defined in the agreement for the initial acquisition of the property and, to the extent permanent financing is not obtained in an amount sufficient to fully repay the acquisition loan, to contribute capital to repay the shortfall between the acquisition loan payoff amount and permanent financial amount. For the period of November 2, 2022 (Inception) to December 31, 2022, the members contributed $22,324,842 of capital.
In the event the managing member determines additional capital contributions are necessary, Members are required to fund their contributions by the date specified in the funding notice. If any Member fails to make the contribution, then the other Member may 1) withdraw their contribution; 2) loan the Company the non-contributing Member’s share of the contribution with the option to treat the contributing Member’s contribution as a loan as well ; or 3) fund the non-contributing members capital contribution and dilute the failing members ownership in accordance with the operating agreement (“Priority Contribution”).
Distributions
Distributions of operating cash flow are generally allocated to members in accordance with the operating agreement as follows:
1. | First, to the Members to pay the accrued preferred return on Priority Contributions of the greater of Prime plus 5% or 18%; |
2. | Second, to the Members to the extent of Priority Contributions; |
3. | Third, to the Members to the extent of the Members Operating Return of 10%; |
4. | Fourth, pro-rata in accordance with the funded capital percentages. |
- 8 -
PPREF/RP East Gate Holdings, LLC and Subsidiary
Notes to Consolidated Financial Statements for the period of November 2, 2022 (Inception) to December 31, 2022
Distributions of Extraordinary Cash Flow, as defined in the operating agreement, shall generally be in allocated in accordance with the operating agreement as follows:
1. | First, to the Members to pay the accrued preferred return on Priority Contributions of the greater of Prime plus 5% or 18%; |
2. | Second, to the Members to the extent of Priority Contributions; |
3. | Third, to the Members to the extent of the Members Operating Return of 10%; |
4. | Fourth, pro-rata in accordance with the funded capital percentages until all capital is returned; |
5. | Fifth, 95% to the Investor Member and 5% to the Operator Member until a 14% IRR has been achieved by the Investor Member and provided no dilution has occurred; and |
6. | Sixth, 90% to the Investor Member and 10% to the Operator Member provided no dilution has occurred. |
Allocation of net income and loss
Income and losses are generally allocated based on the Target Capital Accounts of the Members. Target Capital is the amount the Members would receive if the Company sold all of its assets at book value and repaid all liabilities at book value with any remaining proceeds being distributed to the members in accordance with the distribution provisions of the operating agreement.
Revenue recognition
The Company’s rental revenue consists solely of rents earned from operating leases. Leases generally include a fixed base rent amount as well as a variable nonlease component. The fixed rate component generally includes escalations which generally occur either every year or every five-years. The variable non-lease component of the Company’s operating leases primarily consists of reimbursement of operating expenses such as real estate taxes, insurance and common area maintenance costs. The fixed rate rent is generally recognized straight-line over the expected term of the lease with the variable component recognized based on the reimbursable amounts actually invoiced. The Company has elected the practical expedient to include both the fixed and nonlease components as a single component.
Cash and cash equivalents
Cash and cash equivalents consist of cash held in depository accounts. The Company may maintain cash balances that exceed federally insured limits but does not believe that this results in any significant credit risk.
Tenant accounts receivable
The Company periodically evaluates the collectability of amounts due from tenants and elected an accounting policy to record a general reserve under ASC 450, Contingencies, for tenant receivables that are probable of collection and to record the reserve as bad debt expense. The Company provides for an allowance for doubtful accounts determined principally on the basis of historical experience. Subsequently, tenant receivables balances that are determined to be troubled are removed from the general reserve are written off with an adjustment to rental revenue net of the general reserve attributable
- 9 -
PPREF/RP East Gate Holdings, LLC and Subsidiary
Notes to Consolidated Financial Statements for the period of November 2, 2022 (Inception) to December 31, 2022
to the lease. The Company exercises judgment in assessing the probability of collection and consider payment history and current credit status in making this determination. At December 31, 2022, no allowance has been recorded as the Company considers collection of all receivables highly probable.
Deferred financing costs
The Company presents deferred financing costs as a reduction of the mortgage payable, with amortization of deferred financing costs included as a component of interest expense.
Deferred financing costs are amortized over the life of the related loan (5 years) using the effective interest method. Amortization of deferred financing costs for the period of November 2, 2022 (Inception) to December 31, 2022 was $11,042 which is included in interest expense on the accompanying consolidated statement of operations.
Income taxes
For Federal income tax purposes, the members report their share of the Company’s income or loss for each year on their respective income tax returns. Consequently, no provision for federal income taxes has been included in the accompanying consolidated financial statements.
Accounting for uncertainty in income taxes
The Company evaluates uncertainty in income tax positions based on a more-likely-than-not recognition standard. If that threshold is met, the tax position is then measured at the largest amount that is greater than 50% likely of being realized upon ultimate settlement. As of December 31, 2022, the Company has evaluated its material tax positions and determined that no accruals for uncertain tax positions are required on the Company’s consolidated financial statements. If applicable, the Company records interest and penalties as a component of income tax expense. All of the Company’s tax filings are open to examination by the relevant tax authorities as this is the initial year of operations.
Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Subsequent events
Management has evaluated subsequent events for disclosure in these financial statements through January 31, 2023, which is the date the consolidated financial statements are available to be issued.
- 10 -
PPREF/RP East Gate Holdings, LLC and Subsidiary
Notes to Consolidated Financial Statements for the period of November 2, 2022 (Inception) to December 31, 2022
Note 2 – Acquisition Loan Payable
The Company entered into a acquisition loan agreement with a bank for a maximum amount of $25,626,000. The loan requires monthly payments of interest at 5.49% and matures in November 2027. The Company has the option to extend the loan for an additional 3 years provided the loan-to-value does not exceed 55% at which time the loan will require monthly payments of principal and interest with a balloon payment due in November 2030. The interest rate for the extension period will be determined based on the Weekly Average Yield of the United States Treasury Securities, adjusted for a constant maturity of three years plus 2.0% with a 4.5% floor. The loan has the following prepayment penalties: 1) 3% for any principal repaid during the first year; 2) 2% for any principal repaid during the second year; 3) 1% for any principal repaid during the third year; and 4) .5% for any principal repaid during the fourth year. The acquisition loan had a balance of $25,626,000 at December 31, 2022 and related accrued interest of $117,242.
The acquisition loan is secured by the property and is guaranteed with certain non-recourse carve-out guarantees by the majority owner of the Operator Member. The entire principal balance matures in 2027.
Note 3 – Related party transactions
Management and construction agreement
The Company entered into agreement with an affiliate for the Operator Member to pay a management fee of 3.5% of gross collected operating revenues as defined in the agreement plus reimbursement of personnel costs as agreed-upon by the Members. The agreement has a term of one year and automatically renews thereafter. Either party may cancel the agreement with sixty days prior notice. The Company may also terminate the agreement immediately in writing provided a management fee equal to the next monthly installment, or the management fee that would have accrued on the next 60 days collections. The Company incurred $9,671 of management fees, of which $3,588 are outstanding and included in accrued expenses on the accompany consolidated balance sheet.
The Company may also utilize the management company to perform construction services for the property. The management company is entitled to a construction management fee ranging from 3% on construction with a total cost of under $1,000,000 to 5% on construction with a total cost over $1,000,000 but less than $5,000,000. Any construction fee on construction or improvements over $5,000,000 will be determined by the parties at that time.
Leasing services agreement
The Company entered into a leasing agreement with an affiliate of the Operator Member to pay a leasing fee ranging from 2% to 4% of the lease amount with a term of up to ten years and not including renewals. The agreement has a term of one year and the renews automatically every year with the second year of the agreement ending on December 31, 2023 and then renewing for calendar periods thereafter. The leasing agreement may be terminated by either party with 30 days prior written notice or by written notice sixty-days before the end of the then existing term of the agreement. The Company may terminate the
- 11 -
PPREF/RP East Gate Holdings, LLC and Subsidiary
Notes to Consolidated Financial Statements for the period of November 2, 2022 (Inception) to December 31, 2022
agreement for cause in writing at any time provided an event of default exists. For the period of November 2, 2022 to December 31, 2022, no leasing commissions were earned or paid.
Acquisition services fee
The Company paid an acquisition services fee to an affiliate of the Operator Member of $200,000 which is included in the acquisition cost of the land and building.
Note 4 – Leases
The Company assessed the acquired leases at acquisition for classification under Accounting Standards Codification Section 842: Leases and has determined all of its leases are operating leases. The Company’s assessment involves significant judgements about values of leased property, the term of leases, and discount rates. The Company’s leases generally contain fixed payments of base rent which may include annual or five-year escalations and variable payments which are generally for reimbursements of real estate taxes, insurance and common area maintenance costs. Some leases contain extension or termination options, generally for periods of five years. For the period of November 2, 2022 (Inception) through December 31, 2022, the components of rental income were as follows:
Fixed lease payments | $ | 251,550 | ||
Variable lease payments | 59,036 | |||
Total rental revenue | $ | 310,586 |
The following table presents the future minimum rents the under noncancelable lease agreements Company expects to receive as of December 31, 2022:
Year | Amount | |||
2023 | $ | 2,999,920 | ||
2024 | 2,612,877 | |||
2025 | 2,142,710 | |||
2026 | 2,131,960 | |||
2027 | 2,020,917 | |||
Thereafter | 3,772,395 | |||
Total | $ | 15,680,779 |
Note 5 – Concentration of credit risk
Geographic location
The Company’s assets are located in Chantilly, Virginia. Therefore, the Company is subject to certain economic risks resulting from all of its revenue being derived from one source in one location.
- 12 -
PPREF/RP East Gate Holdings, LLC and Subsidiary
Notes to Consolidated Financial Statements for the period of November 2, 2022 (Inception) to December 31, 2022
Note 6 - Commitments and contingencies
Parallel Joint Venture
The Investor Member has the unilateral right to require the Company or its wholly owned subsidiary to contribute, assign, or sell all or a portion of the property to a parallel joint venture entity, lease all or a portion of the property to a parallel joint venture entity, or enter into a services agreement with a parallel joint venture entity which may include amendments to the operating agreement, management or leasing agreements and cash flow distributions of the Company.
REIT Status
The Investor Member has the sole right to take any action necessary to minimize or avoid the amount of nonqualified REIT income or to protect the qualified REIT asset status of the Investor Member’s investment without regard to the impact on the economics of the Company or its Members. The Investor Member is required to approve all new leases or lease modifications.
- 13 -
Item 2 – Code of Ethics — See Exhibit (a)
As of the end of the period covered by this report, the registrant has adopted a code of ethics (the “Section 406 Standards for Investment Companies – Ethical Standards for Principal Executive and Financial Officers”) that applies to the registrant’s Principal Executive Officer and Principal Financial Officer; the registrant’s Principal Financial Officer also serves as the Principal Accounting Officer.
The registrant hereby undertakes to provide any person, without charge, upon request, a copy of the code of ethics. To request a copy of the code of ethics, contact the registrant 800-225-1852, and ask for a copy of the Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive and Financial Officers.
Item 3 – Audit Committee Financial Expert –
The registrant’s Board has determined that Mr. Morris L. McNair, III, member of the Board’s Audit Committee is an “audit committee financial expert,” and that he is “independent,” for purposes of this item.
Item 4 – Principal Accountant Fees and Services –
(a) Audit Fees
For the fiscal period ended December 31, 2022, the Registrant’s principal accountant was PricewaterhouseCoopers LLP (“PwC”). For the fiscal period ended December 31, 2022, PwC billed the Registrant $65,000 for professional services rendered for the audit of the Registrant’s annual financial statements or services that are normally provided in connection with statutory and regulatory filings.
The Registrant commenced operations on November 3, 2022, therefore no information is available prior to the fiscal period ended December 31, 2022.
(b) Audit-Related Fees
For the fiscal period ended December 31, 2022, PwC did not bill the Registrant for audit-related services.
For the fiscal year ended December 31, 2021: not applicable
(c) Tax Fees
For the fiscal period December 31, 2022: none. For the fiscal year ended December 31, 2021: not applicable
(d) All Other Fees
For the fiscal period December 31, 2022: none. For the fiscal year ended December 31, 2021: not applicable
(e) (1) Audit Committee Pre-Approval Policies and Procedures
THE PGIM MUTUAL FUNDS
AUDIT COMMITTEE POLICY
on
Pre-Approval of Services Provided by the Independent Accountants
The Audit Committee of each PGIM Mutual Fund is charged with the responsibility to monitor the independence of the Fund’s independent accountants. As part of this responsibility, the Audit Committee must pre-approve the independent accounting firm’s engagement to render audit and/or permissible non-audit services, as required by law. In evaluating a proposed engagement of the independent accountants, the Audit Committee will assess the effect that the engagement might reasonably be expected to have on the accountant’s independence. The Committee’s evaluation will be based on:
• | a review of the nature of the professional services expected to be provided, |
• | a review of the safeguards put into place by the accounting firm to safeguard independence, and |
• | periodic meetings with the accounting firm. |
Policy for Audit and Non-Audit Services Provided to the Funds
On an annual basis, the scope of audits for each Fund, audit fees and expenses, and audit-related and non-audit services (and fees proposed in respect thereof) proposed to be performed by the Fund’s independent accountants will be presented by the Treasurer and the independent accountants to the Audit Committee for review and, as appropriate, approval prior to the initiation of such services. Such presentation shall be accompanied by confirmation by both the Treasurer and the independent accountants that the proposed non-audit services will not adversely affect the independence of the independent accountants. Such proposed non-audit services shall be described in sufficient detail to enable the Audit Committee to assess the appropriateness of such services and fees, and the compatibility of the provision of such services with the auditor’s independence. The Committee shall receive periodic reports on the progress of the audit and other services which are approved by the Committee or by the Committee Chair pursuant to authority delegated in this Policy.
The categories of services enumerated under “Audit Services”, “Audit-related Services”, and “Tax Services” are intended to provide guidance to the Treasurer and the independent accountants as to those categories of services which the Committee believes are generally consistent with the independence of the independent accountants and which the Committee (or the Committee Chair) would expect upon the presentation of specific proposals to pre-approve. The enumerated categories are not intended as an exclusive list of audit, audit-related or tax services, which the Committee (or the Committee Chair) would consider for pre-approval.
Audit Services
The following categories of audit services are considered to be consistent with the role of the Fund’s independent accountants:
• | Annual Fund financial statement audits |
• | Seed audits (related to new product filings, as required) |
• | SEC and regulatory filings and consents |
Audit-related Services
The following categories of audit-related services are considered to be consistent with the role of the Fund’s independent accountants:
• | Accounting consultations |
• | Fund merger support services |
• | Agreed Upon Procedure Reports |
• | Attestation Reports |
• | Other Internal Control Reports |
Individual audit-related services that fall within one of these categories (except for fund merger support services) and are not presented to the Audit Committee as part of the annual pre-approval process are subject to an authorized pre-approval by the
Audit Committee so long as the estimated fee for those services does not exceed $30,000. Any services provided under such pre-approval will be reported to the Audit Committee at its next regular meeting. Should the amount of such services exceed $30,000 any additional fees will be subject to pre-approval by the Committee Chair (or any other Committee member on whom this responsibility has been delegated). Fees related to fund merger support services are subject to a separate authorized pre-approval by the Audit Committee with fees determined on a per occurrence and merger complexity basis.
Tax Services
The following categories of tax services are considered to be consistent with the role of the Fund’s independent accountants:
• | Tax compliance services related to the filing or amendment of the following: |
• | Federal, state and local income tax compliance; and, |
• | Sales and use tax compliance |
• | Timely RIC qualification reviews |
• | Tax distribution analysis and planning |
• | Tax authority examination services |
• | Tax appeals support services |
• | Accounting methods studies |
• | Fund merger support services |
• | Tax consulting services and related projects |
Individual tax services that fall within one of these categories and are not presented to the Audit Committee as part of the annual pre-approval process are subject to an authorized pre-approval by the Audit Committee so long as the estimated fee for those services does not exceed $30,000. Any services provided under such pre-approval will be reported to the Audit Committee at its next regular meeting. Should the amount of such services exceed $30,000 any additional fees will be subject to pre-approval by the Committee Chair (or any other Committee member on whom this responsibility has been delegated).
Other Non-Audit Services
Certain non-audit services that the independent accountants are legally permitted to render will be subject to pre-approval by the Committee or by one or more Committee members to whom the Committee has delegated this authority and who will report to the full Committee any pre-approval decisions made pursuant to this Policy. Non-audit services presented for pre-approval pursuant to this paragraph will be accompanied by a confirmation from both the Treasurer and the independent accountants that the proposed services will not adversely affect the independence of the independent accountants.
Proscribed Services
The Fund’s independent accountants will not render services in the following categories of non-audit services:
• | Bookkeeping or other services related to the accounting records or financial statements of the Fund |
• | Financial information systems design and implementation |
• | Appraisal or valuation services, fairness opinions, or contribution-in-kind reports |
• | Actuarial services |
• | Internal audit outsourcing services |
• | Management functions or human resources |
• | Broker or dealer, investment adviser, or investment banking services |
• | Legal services and expert services unrelated to the audit |
• | Any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible. |
Pre-approval of Non-Audit Services Provided to Other Entities Within the PGIM Fund Complex
Certain non-audit services provided to PGIM Investments LLC or any of its affiliates that also provide ongoing services to the PGIM Mutual Funds will be subject to pre-approval by the Audit Committee. The only non-audit services provided to these entities that will require pre-approval are those related directly to the operations and financial reporting of the Funds. Individual projects that are not presented to the Audit Committee as part of the annual pre-approval process will be subject to pre-approval by the Committee Chair (or any other Committee member on whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $30,000. Services presented for pre-approval pursuant to this paragraph will be accompanied by a confirmation from both the Treasurer and the independent accountants that the proposed services will not adversely affect the independence of the independent accountants.
Although the Audit Committee will not pre-approve all services provided to PGIM Investments LLC and its affiliates, the Committee will receive an annual report from the Fund’s independent accounting firm showing the aggregate fees for all services provided to PGIM Investments and its affiliates.
(e) (2) Percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X –
Fiscal Year Ended December 31, 2022 | Fiscal Year Ended December 31, 2021 | |||
4(b) | Not applicable. | Not applicable. | ||
4(c) | Not applicable. | Not applicable. | ||
4(d) | Not applicable. | Not applicable. |
(f) Percentage of hours expended attributable to work performed by other than full time employees of principal accountant if greater than 50%.
The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was 0%.
(g) Non-Audit Fees
The aggregate non-audit fees billed by the Registrant’s principal accountant for services rendered to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant for the fiscal period ended December 31, 2022 was $0. For the fiscal year ended December 31, 2021: not applicable
(h) Principal Accountant’s Independence
Not applicable as the Registrant’s principal accountant has not provided non-audit services to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X.
(i) Not applicable.
(j) Not applicable.
Item 5 – Audit Committee of Listed Registrants –
The registrant has a separately designated standing audit committee (the “Audit Committee”) established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The members of the Audit Committee are Morris L. McNair, III (Chair), Mary Lee Schneider, and Thomas M. Turpin.
Item 6 – Schedule of Investments – The schedule is included as part of the report to shareholders filed under Item 1 of this Form.
Item 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
PGIM Real Estate
PGIM Real Estate’s proxy voting policy contains detailed voting guidelines on a wide variety of issues commonly voted upon by stockholders. These guidelines reflect PGIM Real Estate’s judgment of how to further the best long-range economic interest of our clients (i.e., the mutual interest of clients in seeing the appreciation in value of a common investment over time) through the stockholder voting process. PGIM Real Estate’s policy is generally to vote proxies on social or political issues on a case by case basis. Additionally, where issues are not addressed by our policy, or when circumstances suggest a vote not in accordance with our established guidelines, voting decisions are made on a case-by-case basis taking into consideration the potential economic impact of the proposal. With respect to international holdings, we take into account additional restrictions in some countries that might impair our ability to trade those securities or have other potentially adverse economic consequences, and generally vote foreign securities on a best efforts basis in accordance with the recommendations of the issuer’s management if we determine that voting is in the best economic interest of our clients.
PGIM Real Estate utilizes the services of a third party proxy voting facilitator, and upon receipt of proxies will direct the voting facilitator to vote in a manner consistent with PGIM Real Estate’s established proxy voting guidelines described above (assuming timely receipt of proxy materials from issuers and custodians). In accordance with its obligations under the Managers Act, PGIM Real Estate provides full disclosure of its proxy voting policy, guidelines and procedures to its clients upon their request, and will also provide to any client, upon request, the proxy voting records for that client’s securities.
Item 8 – Portfolio Managers of Closed-End Management Investment Companies
As of December 31, 2022, the following individuals are jointly and primarily responsible for the day-to-day management of the Fund.
Darin Bright, Senior Portfolio Manager. Mr. Bright is a Managing Director and Head of the PGIM U.S. Core Plus Investment Group. Based in Madison, New Jersey, Mr. Bright is the senior portfolio manager for all core plus funds including PGIM Private Real Estate Fund and PGIM Real Estate’s flagship U.S. Core Plus equity real estate fund, PRISA II. Prior to joining PGIM Real Estate, Mr. Bright was a Vice President with Grubb & Ellis, a real estate asset management and brokerage company, advising real estate equity strategies for institutional and corporate clients. Before this, Mr. Bright was a commercial real estate appraiser with Richard E. Nichols Associates, providing advisory and valuation services to lenders, developers and institutional clients.
Caitlin O’Connor, Portfolio Manager. Ms. O’Connor is an executive director at PGIM Real Estate and a member of the U.S. core plus investment platform. Ms. O’Connor serves as a portfolio manager for both PGIM Private Real Estate Fund and PRISA II, PGIM Real Estate’s flagship U.S. Core Plus equity real estate fund. Based in San Francisco, Ms. O’Connor has a leadership role in all aspects of fund strategy, investment and management. Prior to that, Ms. O’Connor held multiple roles in acquisitions and asset management at PGIM Real Estate during her 15 year tenure with the firm. Punctuating her time at PGIM Real Estate, Ms O’Connor spent two years as a development director at Lennar Multifamily Communities in the Northern California region.
Brandon Short, Portfolio Manager. Mr. Short is an Executive Director at PGIM Real Estate and Portfolio Manager for PGIM Private Real Estate Fund. Based in Madison, New Jersey, Brandon joined the firm in 2021 and has a leadership role in all aspects of the funds’ strategy and management. Prior to joining PGIM Real Estate, Brandon was M&A Director at Round Hill Capital, where he led the firm’s inorganic growth strategy and managed corporate-level debt and equity financings. Before joining Round Hill, Brandon was a member of the Cerberus European Capital Advisors team where he underwrote real estate assets associated with non-performing loans and developed optimal business plans offering the most accretive property management and exit strategies. Prior to joining Cerberus, Brandon worked at Goldman Sachs as a real estate investment banker based in both New York and Dubai.
Other Accounts Managed by the Portfolio Managers. The following table sets forth certain information with respect to the portfolio managers for the Fund. Unless noted otherwise, all information is provided as of December 31, 2022.
The following table identifies, as of December 31, 2022: (i) the other registered investment companies, pooled investment vehicles and other accounts managed by an investment committee (or equivalent body) on which the corresponding portfolio manager serves and (ii) the total assets under management (“AUM”) of such companies, vehicles and accounts, and (iii) the number and total AUM of such companies, vehicles and accounts with respect to which the advisory fee is based on performance.
Darin Bright
(in USD Millions, Unless Otherwise Mentioned) | Account(s) Managed | Assets of Accounts | Number of Accounts Subject to a Performance Fee | Assets Subject to a Performance Fee | ||||||||
Registered Investment Companies | 0 | $ | 0 | 0 | $ | 0 | ||||||
Pooled Investment Vehicles Other Than Registered Investment Companies | 1 | $ | 17,546.0 | 0 | $ | 0 | ||||||
Other Accounts | 2 | $ | 1,200.8 | |||||||||
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Caitlin O’Connor
Account(s) Managed | Assets of Accounts | Number of Accounts Subject to a Performance Fee | Assets Subject to a Performance Fee | |||||||||
Registered Investment Companies | 0 | $ | 0 | 0 | $ | 0 | ||||||
Pooled Investment Vehicles Other Than Registered Investment Companies | 1 | $ | 17,546.0 | 0 | $ | 0 | ||||||
Other Accounts | 1 | $ | 8.0 | 0 | $ | 0 | ||||||
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Brandon Short
Account(s) Managed | Assets of Accounts | Number of Accounts Subject to a Performance Fee | Assets Subject to a Performance Fee | |||||||||
Registered Investment Companies | 0 | $ | 0 | 0 | $ | 0 | ||||||
Pooled Investment Vehicles Other Than Registered Investment Companies | 0 | $ | 0 | 0 | $ | 0 | ||||||
Other Accounts | 0 | $ | 0 | 0 | $ | 0 | ||||||
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Compensation and Conflicts Disclosure:
Compensation
PGIM Real Estate provides a competitive total compensation package that engages, motivates and retains top talent while aligning their interests with those of our clients. Portfolio managers are compensated based on the overall performance of PGIM Real Estate and performance of the specific fund or funds they are responsible for managing.
Specifically, there are three elements of compensation: base salary, bonus and long term incentive compensation.
•Base salary levels are reviewed annually in the first quarter of the year to determine if an individual should receive an increase based on performance, demands of the job and market compensation data which is provided by Prudential Financial, Inc.’s corporate compensation group.
•Cash bonuses are awarded annually based on the scope of the individual’s responsibilities, their personal and portfolio performance for the prior year, and the size of the overall bonus pool available in a given year. The bonus pool is determined based on the financial performance of PGIM Real Estate and the investment performance of the portfolio managers specific fund or funds measured against each applicable benchmark or performance targets. An individual’s share of the pool is based on his or her contribution toward meeting these goals.
•Portfolio management team members at the Vice President level and above also receive annual long-term incentive program compensation (“LTIP”). LTIP awards are based on the same factors as the annual cash bonus. The award, however, is not immediately paid to the individual and vests over three years as described below. Twenty percent (20%) of the LTIP award is made in the form of Prudential Financial restricted stock units which vest proportionately over three years with one-third of the grant vesting on each anniversary until fully vested. The remaining eighty percent (80%) is a deferred cash award which vests in its entirety on the third anniversary of the grant. Over the vesting period, the value of the deferred cash award increases or decreases based on the performance of the accounts on which the portfolio manager works directly.
Securities Ownership of Portfolio Managers
The Fund is a newly-organized investment company. Accordingly, as of the date of this Statement of Additional Information, none of the portfolio managers beneficially owned any securities issued by the Fund.
Conflicts of Interest
PGIM Real Estate is a division of PGIM, which is an indirect, wholly-owned subsidiary of Prudential Financial and is part of a full scale global financial services organization, affiliated with insurance companies, investment advisers and broker-dealers. PGIM Real Estate’s portfolio managers are often responsible for managing multiple accounts, including accounts of affiliates, institutional accounts, mutual funds, insurance company separate accounts and various pooled investment vehicles, such as commingled trust funds and unregistered funds. These affiliations and portfolio management responsibilities may cause potential and actual conflicts of interest. PGIM Real Estate aims to conduct itself in a manner it considers to be the most fair and consistent with its fiduciary obligations to all of its clients, including the Fund.
Management of multiple accounts and funds side-by-side may raise potential conflicts of interest relating to the allocation of investment opportunities, the aggregation and allocation of trades and cross trading. PGIM Real Estate has developed policies and procedures designed to address these potential conflicts of interest.
There may be restrictions imposed by law, regulation or contract regarding how much, if any, of a particular investment PGIM Real Estate may purchase or sell on behalf of a Fund, and as to the timing of such purchase or sale. Such restrictions may come into play as a result of PGIM Real Estate’s relationship with Prudential Financial and its other affiliates. The Fund may be prohibited from engaging in transactions with its affiliates even when such transactions may be beneficial for the Fund. Certain affiliated transactions are permitted in accordance with applicable law and procedures adopted thereunder by the Fund and reviewed by the independent directors of the Fund.
PGIM Real Estate may come into possession of material, non-public information with respect to a particular issuer and as a result be unable to execute purchase or sale transactions in securities of such issuer for a Fund. PGIM Real Estate, on behalf of client portfolios, engages in real estate and other transactions with REITs and real estate operating companies and may thereby obtain material, non-public information about issuers, resulting in restrictions in trading in securities of such issuers. PGIM Real Estate generally is able to avoid certain other potential conflicts due to the possession of material, non-public information by maintaining information barriers to prevent the transfer of this information between units of PGIM as well as between affiliates and PGIM. Additionally, in an effort to avoid potential conflicts of interest, PGIM Real Estate has procedures in place to carefully consider whether or not to accept material, non-public information with respect to certain issuers, where appropriate.
Certain affiliates of PGIM Real Estate develop and may publish credit research that is independent from the research developed within PGIM Real Estate. PGIM Real Estate may hold different opinions on the investment merits of a given security, issuer or industry such that PGIM Real Estate may be purchasing or holding a security for the Fund and an affiliated entity may be selling or recommending a sale of the same security or other securities of the issuer. Conversely, PGIM Real Estate may be selling a security for the Fund and an affiliated entity may be purchasing or recommending a buy of the same security or other securities of the same issuer. In addition, PGIM Real Estate’s affiliated broker-dealers or investment advisers may be executing transactions in the market in the same securities as the Fund at the same time. PGIM Real Estate may cause transactions to be executed for the Fund concurrently with authorizations to purchase or sell the same assets for other accounts managed by PGIM Real Estate, including proprietary accounts or accounts of affiliates. In these instances, the executions of purchases or sales, where possible, are allocated equitably among the various accounts (including the Fund).
PGIM Real Estate may buy or sell, or may direct or recommend that one client buy or sell, assets of the same kind or class that are purchased or sold for the Fund, at prices which may be different. In addition, PGIM Real Estate may, at any time, execute trades of assets of the same kind or class in one direction for an account and trade in the opposite direction or not trade for any other account, including the Fund, due to differences in investment strategy or client direction.
The fees charged to advisory clients by PGIM Real Estate may differ depending upon a number of factors including, but not limited to, the unit providing the advisory services, the particular strategy, the size of a portfolio being managed, the relationship with the client, the origination and service requirements and the asset class involved. Fees may also differ based on account type (e.g., commingled accounts, trust accounts, insurance company separate accounts, and corporate, bank or trust-owned life insurance products). Fees are negotiable so one client with similar investment objectives or goals may be paying a higher fee than another client. Fees paid by certain clients may also be higher due to performance based fees which increase based on the performance of a portfolio above an established benchmark.
Large clients generate more revenue for PGIM Real Estate than do smaller accounts. A portfolio manager may be faced with a conflict of interest when allocating scarce investment opportunities given the benefit to PGIM Real Estate of favoring accounts that pay a higher fee or generate more income for PGIM. To address this conflict of interest, PGIM Real Estate has adopted allocation policies as well as supervisory procedures that are intended to fairly allocate investment opportunities among competing client accounts. PGIM Real Estate manages certain funds that are subject to incentive compensation on a side-by-side basis with other accounts including the Fund. PGIM Real Estate has implemented policies and procedures to address potential conflicts of interest arising out of such side-by-side management.
Conflicts of interest may also arise regarding proxy voting. A committee of senior business representatives together with relevant regulatory personnel oversees the proxy voting process and monitors potential conflicts of interest relating to proxy voting.
PGIM Real Estate and certain of its affiliates engage in various activities related to investment in real estate. For example, PGIM Real Estate or any of its affiliates may enter into financing arrangements with issuers of real estate securities, including the making of loans secured by the assets or by the credit of the issuer of the real estate securities and may, in certain circumstances, exercise of creditor or other remedies, against the issuer of such real estate securities in connection with such financing arrangements. In addition, PGIM Real Estate or any of its affiliates may buy or sell, or may direct or recommend that another person buy or sell, assets of the same kind or class, or from the same issuer as
are purchased or sold for this or any other account under the direction of PGIM Real Estate or any of its affiliates. PGIM Real Estate or its affiliates, as a part of its direct investment in real estate on behalf of clients, may obtain material non-public information regarding an issuer of securities that the Fund may hold or wish to hold. As a consequence of these activities, PGIM Real Estate’s ability to purchase or sell, or to choose the timing of purchase or sale of, real estate securities of a given issuer may be restricted by contract or by applicable laws, including ERISA or federal securities laws.
Prudential Financial and the general account of The Prudential Insurance Company of America (“PICA”) may at times have various levels of financial or other interests in companies whose securities may be purchased or sold in PGIM’s client accounts, including the Fund. These financial interests may at any time be in potential or actual conflict or may be inconsistent with positions held or actions taken by PGIM on behalf of the Fund. These interests can include loan servicing, debt or equity financing, services related to advising on merger and acquisition issues, strategic corporate relationships or investments and the offering of investment advice in various forms. Thus PGIM may invest Fund assets in the securities of companies with which PGIM or an affiliate of PGIM has a financial relationship, including investment in the securities of companies that are advisory clients of PGIM.
PGIM Real Estate follows Prudential Financial’s policies on business ethics, personal securities trading by investment personnel, and information barriers and has adopted a code of ethics, allocation policies, supervisory procedures and conflicts of interest policies, among other policies and procedures, which are designed to ensure that clients are not harmed by these potential and actual conflicts of interests; however, there is no guarantee that such policies and procedures will detect and will ensure avoidance or disclosure of each and every situation in which a conflict may arise.
The Manager and its affiliates have existing and potential relationships with a significant number of corporations, institutions and individuals in matters related to its other businesses and investments. As a result of these relationships, the Manager or Subadviser may face conflicts of interest in connection with any transactions involving an investment by the Fund with such persons, including with respect to the consideration offered by, and the obligations of, such persons. In determining whether to pursue a particular investment on behalf of the Fund, these relationships could be considered by the Manager or Subadviser, and there may be certain potential investments which will not be pursued on behalf of the Fund in view of such relationships. As a result, there can be no assurance that all potentially suitable investment opportunities that come to the attention of the Manager or Subadviser will be made available to the Fund.
Item 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – None.
Item 10 – Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.
Item 11 – Controls and Procedures
(a) | It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure. |
(b) | There has been no significant change in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12 – Controls and Procedures - Disclosure of Securities Lending Activities for Closed-End Management Investment
Companies – Not applicable.
Item 13 – Exhibits
(a)(1) Code of Ethics – Attached hereto as Exhibit EX-99.CODE-ETH.
(a)(2)(1) Any written solicitation to purchase securities under Rule 23c-1 – Not applicable.
(a)(2)(2) Change in the registrant’s independent public accountant – Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: PGIM Private Real Estate Fund, Inc.
By: | /s/ Andrew R. French | |||
Andrew R. French | ||||
Secretary | ||||
Date: | February 24, 2023 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Stuart S. Parker | |||
Stuart S. Parker | ||||
President (Principal Executive Officer) | ||||
Date: | February 24, 2023 | |||
By: | /s/ Christian J. Kelly | |||
Christian J. Kelly | ||||
Chief Financial Officer (Principal Financial Officer) | ||||
Date: | February 24, 2023 |