Recognizing that ethnic shopping centers provide a highly attractive investment opportunity, Prudential Real Estate Investors has entered into a joint venture with Pacific Castle to acquire retail properties in the western U.S. Known as PIM Pacific Castle Venture LLC, the fund has the capacity to invest approximately $500 million with leverage.

“Our joint venture with Prudential Real Estate Investors will allow us to significantly grow our current portfolio, enabling Pacific Castle to gain a more competitive edge in the marketplace,” according to Rod Astarabadi, president of Pacific Castle. “This is a unique platform relationship that will primarily enable us to close deals in as little as 10 days, and acquire a single property or large portfolios on an all-cash basis.”

Founded by CEO Wayne Cheng in 1993, Irvine, Calif.-based Pacific Castle is known as a highly entrepreneurial, nimble company that owns 10 shopping centers with a combined value of $300 million. Nine centers are located in Southern California and one is in Las Vegas. Pacific Castle has a successful track record, delivering 50% annualized returns to investors.

Separate from its existing portfolio of assets, Pacific Castle’s newly launched fund in conjunction with Prudential has a target internal rate of return (IRR) of at least 15%, says Astarabadi. The fund, which has an expected life of 6.5 years, has the potential to acquire 20 to 40 properties over the next three years, Astarabadi told NREI on Monday during the annual International Council of Shopping Centers convention in Las Vegas.

“We buy well-located lifestyle centers in good locations with upside potential,” emphasizes Astarabadi, who has been with the company for five years and previously served as director of due diligence and acquisitions with the Passco Cos.

Hacienda Center in Southern California illustrates his point. One of Pacific Castle’s prized assets located in Los Angeles County, Hacienda Center counts among its tenants 99 Ranch Market, a Chinese supermarket chain, and El Torito, a Mexican casual dining restaurant. Located adjacent to Puente Hills Mall, the 122,420 sq. ft. center was only 49% occupied when Pacific Castle bought the property in 2002.

“The marketplace is expensive. There is more demand for good shopping centers in general,” says Astarabadi, pointing out that properties with upside potential provide an attractive investment opportunity.

The newly formed joint venture’s first purchases include Bay Plaza in National City, Calif., from Safco Capital for approximately $25 million and Rancho Cordova Town Center in Rancho Cordova, Calif., from the Passco Cos. for $27 million.

Bay Plaza, located on East Plaza Boulevard in National City, a suburb of San Diego, is at the heart of the planned redevelopment of Filipino Village. Catering to the city’s Filipino population, the 123,000 sq. ft. center’s major tenants include Big Lots, Seafood City, IHOP Restaurant and Goldilocks Bakery.

– Matt Valley