SEC Company Response from PGIM Private Real Estate Fund, Inc. (CIK 0001875084) — Nov 17, 2021
PGIM Private Real Estate Fund, Inc. (CIK 0001875084)
Date: Nov. 17, 2021 · CIK: 0001875084 · Accession: 0001104659-21-140489
AI Filing Summary & Sentiment
File numbers found in text: 333-259133, 811-23739
Letter
Simpson Thacher & Bartlett LLP
425 LEXINGTON AVE.
NEW YORK, N.Y. 10017
TELEPHONE: +1-212-455-2000
FACSIMILE: +1-212-455-2502
Direct Dial Number
E-mail Address
(212) 455-2516
bwells@stblaw.com
November 17, 2021
Via EDGAR
Securities and Exchange Commission
Division of Investment Management
100 F Street, N.E.
Washington, D.C. 20549
Attn: Alberto H. Zapata, Senior Counsel
Re: PGIM Private Real Estate Fund, Inc. Registration Statement on Form N-2 Filing Nos.: 333-259133 and 811-23739
Ladies and Gentlemen:
On behalf of PGIM Private Real Estate Fund, Inc. (the “Fund”), please find the Fund’s Pre-Effective Amendment No. 1 (“Amendment No. 1”) to the above referenced registration statement of the Fund originally filed with the Securities and Exchange Commission (the “Commission”) on August 27, 2021, pursuant to the Securities Act of 1933, as amended (the “Securities Act”), and the Investment Company Act of 1940, as amended (the “1940 Company Act”) (the “Registration Statement”), through the Commission’s electronic data gathering, analysis and retrieval (“EDGAR”) system.
In addition, we are providing the following responses to comments received by email from the staff of the Commission (the “Staff”) on September 29, 2021, relating to the Registration Statement. Please note that all page numbers in our responses are references to the page numbers of Amendment No. 1. All capitalized terms used but not defined in this letter have the meanings given to them in Amendment No. 1.
General
1. Several pages of the prospectus contain blanks for missing disclosure, such as the fee table. Please insure that all missing information is included in a pre-effective amendment. We may have additional comments on such portions when you complete them in a pre-effective amendment.
Response: The Fund has further updated its disclosure and will make further updates in later amendments. We acknowledge the Staff may have additional comments.
2. Please tell us if you have presented or will present any “test the waters” materials to potential investors in connection with this offering. If so, please provide us with copies of such materials.
Response: The Fund has not presented any test the water materials to potential investors and does not anticipate doing so.
3. Please confirm that the Fund intends to rely on section 23(c)(2) of the 1940 Act and rule 13e-4 under the 34 Act in connection with any tender offers. Also, clarify whether the Fund in addition intends to conduct a repurchase program according to rule 23c-3 under the 1940 Act.
Response: Confirmed that the Fund intends to rely on Section 23(c)(2) of the 1940 Act and Rule 13e-4 under the Exchange Act in connection with the tender offers contemplated in the Registration Statement. The Fund does not intend to conduct a repurchase program according to Rule 23c-3 under the 1940 Act.
4. We note that the registration statement discloses a number of requests for exemptive relief, both future and current (i.e., multi-class, fee arrangements, section 19(b), and co-investing). Please advise us as to the status of each of the applications disclosed in the registration statement and whether you have submitted or expect to submit any other exemptive applications or no-action requests in connection with the registration statement. Additionally, please (i) provide the order number for any exemptive relief that has been granted, and (ii) disclose, each time an application for exemptive relief which has not yet been granted is mentioned in the registration statement, that such relief is subject to Commission approval and there is no assurance the Commission will grant the relief.
Response: The Fund filed an application for exemptive relief to offer multiple share classes on September 24, 2021 (File No. 812-15266). The Fund currently intends to also file for exemptive relief to permit co-investments with affiliates and also to permit the Fund’s investment manager to receive its fees in shares of the Fund, however, the Fund has not yet filed applications for these matters at this time. The Fund’s investment manager has received exemptive relief (File No. 812-13998) from Section 19(b) of the 1940 Act and Rule 19b-1 thereunder that permits the Fund to pay distributions from long-term capital gains more frequently than once per year.
The Fund has added disclosure stating that relief that has not been granted is subject to Commission approval and there is no assurance the Commission will grant the relief.
Cover Page
1. As part of the discussion of the Fund on the cover page, please disclose what the Fund must distribute to its stockholders in order to qualify as a REIT.
Response: The Fund has added disclosure on the cover page that in order to qualify as a REIT the Fund must distribute at least 90% of its REIT taxable income each year to its stockholders.
2. Please tell us if and how much the Fund will invest in private real estate funds that rely on section 3(c)(1) or 3(c)(7) of the 1940 Act. If the Fund will invest more than 15% of its net assets in private real estate funds that rely on sections 3(c)(1) or 3(c)(7), please note that registered closed-end funds that invest more than 15% of their net assets in such funds should impose a minimum initial investment requirement of at least $25,000 and restrict sales to investors that, at a minimum, satisfy the accredited investor standard. Please confirm to us that the Fund will invest 15% or less or that they will impose a $25,000 initial investment minimum and will limit investments to accredited investors. We may have additional comments after reviewing your response.
Response: The Fund confirms that it will not invest more than 15% of its assets in private funds that rely on Section 3(c)(1) or 3(c)(7) of the 1940 Act. The Fund has added disclosure confirming this in the description of its investment strategies.
3. Please clarify whether the equity and debt investments mentioned as part of the Fund’s 80% policy are backed by real estate. Further, please elaborate on what is meant by “private transactions?”
Response: The Fund has revised its disclosure to clarify that the 80% test includes equity investments in real estate or real estate related companies and debt investments backed by real estate or real estate related companies. The Fund considers transactions to be private if they are not executed on an established trading market.
4. Investment Strategies. If derivatives are counted towards the Fund’s 80% investment policy, please disclose here or in the body of the prospectus that derivatives are valued based on market value for this purpose. Please also specifically describe the types of derivatives in which the Fund can invest.
Response: The Fund has disclosed in the Investment Objectives and Strategies section that derivatives are valued at market value for purposes of the 80% investment policy. The Fund has added disclosure stating that its derivatives investments may include options contracts, futures contracts, options on futures contracts, indexed securities, credit linked notes, credit default swaps and other swap agreements for investment, hedging and risk management purposes.
5. Investment Strategies. The Fund states that it will invest in, among other things, “net lease.” Please explain to investors what is meant by this term in plain English. The Fund also states that property level debt will be incurred by “operating entities.” Please provide further disclosure elaborating on what is meant by “operating entities.”
Response: The Fund has added disclosure explaining that “net lease” investments are properties leased to long-term tenants where the tenants have agreed to pay substantially all expenses related to the property, including taxes, insurance and maintenance. The Fund has added disclosure explaining that operating entities referenced are entities that own and manage real properties.
6. Please provide disclosure regarding up to how many shares the Fund intends to offer on a continuous basis.
Response: The Fund has not yet determined the size of its offering and will disclose the size in a later amendment.
7. Please reformat the bolded paragraph regarding the lack of a secondary market as a bolded bulleted paragraph to further highlight this disclosure and add the following statement: An investment in the Fund may not be suitable for investors who may need the money they invest in a specified timeframe. Further, provide an internal cross-reference to the section of the prospectus addressing risk factors associated with leverage.
Response: The Fund has updated its disclosure accordingly. The Fund has already provided an internal cross-reference to both “Leverage” and “Risks—Leverage Risks.”
8. Please add a second bolded bulleted paragraph to the cover page stating that:
An investor will pay a sales load of up to [ ]% and offering expenses of up to [ ]% on the amounts it invests. If you pay the maximum aggregate [ ]% for sales load and offering expenses, you must experience a total return on your net investment of [ ]% in order to recover these expenses.
Response: The Fund has updated its disclosure accordingly.
9. The Fund states that it expects to utilize property level debt financing and that such financing is composed of mortgages on Fund properties that are not recourse to the Fund except in limited circumstances. Please explain in plain English the meaning of the phrase: “not recourse to the Fund.”
Response: The Fund has added disclosure explaining that property level debt that is not recourse to the Fund is debt where, in a default, the lender can only seek recovery from the property and cannot further pursue any recovery from the Fund or any of its other assets.
Prospectus Summary
1. The Fund. Please also add disclosure to the first paragraph informing investors of the Fund’s registration status vis a vis the Securities Act of 1933.
Response: The Fund has added disclosure in the Prospectus Summary that the Fund is offering its shares pursuant to an offering registered under the Securities Act of 1933, as amended.
2. The Offering. Please explain, supplementally, whether the Fund will offer one class of securities until it receives exemptive relief. If so, disclose what share class the Fund intends to offer.
Response: The Fund confirms that it will offer only one class of shares unless and until it receives exemptive relief to offer multiple share classes. The Fund has disclosed it will offer Class I shares prior to receiving such exemptive relief.
3. Investment Management Agreement. Assuming the Fund receives multi-class exemptive relief, please disclose which class of shares serves as the basis for the incentive fee.
Response: The Investment Manager’s incentive fee is calculated based on Portfolio Operating Income, which excludes distribution and servicing fees. As a result the incentive fee is calculated the same for all share classes.
4. Investment Process. The Fund states that “ESG considerations are embedded though the various stages of PGIM Real Estate’s investment process . . . .” Clarify whether such ESG screens are applied to all of the Fund’s investments or just a portion of its investments.
Response: The Fund confirms that the referenced ESG screens will be applied to all of the Fund’s investments and has clarified that in the disclosure accordingly.
5. Repurchases. The Fund states that it intends to conduct quarterly tender offers. Please provide summary disclosure or an internal cross reference explaining the investor notification process for such tender offers.
Response: The Fund has added in Repurchase of Common Stock that it will conduct its tender offers pursuant to Rule 13e-4 of the Exchange Act and will file a Schedule TO and related exhibits on EDGAR and deliver notifications to stockholders as required by Rule 13e-4.
6. Repurchases. Please reconcile the statements in this section: 1) the Fund intends, but is not obligated, to conduct quarterly tender offers; and 2) the Fund intends to comply with an exemption under FINRA Rule 5110 that requires the Fund to make at least two tender offers per calendar year. Clarify the consequence with regard to the FINRA exemption if it decides not to conduct a tender within a calendar year.
Response: The Fund intends to conduct four tender offers per year, but is not obligated to do so. The Fund will comply with the exemption under FINRA Rule 5110 if it makes at least two tender offers per calendar year (such that the Fund could miss one or two or its intended four tender offers per year and still comply). The exemption under FINRA Rule 5110 would allow the Fund to use the compensation limits of FINRA Rule 2341 instead of FINRA Rule 5110.
7. Leverage. Explain more clearly the limitations on leverage are tied to the 1940 Act.
Response: The Fund has added disclosure that it is limited to the leverage limits imposed by the 1940 Act.
8. Acquisition of Initial Portfolio. The Fund refers investors to the financial statements in SAI for more information about the Predecessor Fund. This is inadequate prospectus disclosure concerning the Predecessor Fund. Please provide further disclosure in the prospectus explaining the planned reorganization of the Predecessor Fund and the specifics concerning its current investments, objectives, and strategies. Please also disclose that the Predecessor Fund was not subject to the Investment Company Act and, thus, may have been managed differently than the Fund.
Response: The Fund has disclosed that the Predecessor Fund was not subject to the 1940 Act and thus was managed differently than the Fund will be managed. The Fund agrees to provide this information on the predecessor fund in a later amendment.
9. Interest Rate Risk. Please include disclosure regarding the currently historically low interest rate environment and how that may impact the Fund and its investments.
Response: The Fund has added the requested disclosure.
10. Periodic Tender Offer Risk. Please add summary risk disclosure that includes the potential tax consequences of share repurchases and related portfolio security sales to investors and to the Fund. Please also discuss the effect that share repurchase offers and related financings might have on expense ratios and on portfolio turnover. See Guidelines to Form N-2, Guide 2.
Response: The Fund has added risk disclosure that share repurchases may result in disposing assets, which could increase portfolio turnover. The Fund notes that the Registration Statement already includes disclosure that the repurchase may result in a smaller base of assets resulting in an increase in expenses per share. The Fund has also added disclosure on the tax consequences of exchanging shares of Common Stock for cash pursuant to a tender offer.
11. Periodic Tender Risk. The Fund states that the use of leverage to finance the repurchase of Common Stock will further increase the Fund’s expenses borne by shareholders of the Fund, in
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CORRESP 1 filename1.htm Simpson Thacher & Bartlett LLP 425 LEXINGTON AVE. NEW YORK, N.Y. 10017 TELEPHONE: +1-212-455-2000 FACSIMILE: +1-212-455-2502 Direct Dial Number E-mail Address (212) 455-2516 bwells@stblaw.com November 17, 2021 Via EDGAR Securities and Exchange Commission Division of Investment Management 100 F Street, N.E. Washington, D.C. 20549 Attn: Alberto H. Zapata, Senior Counsel Re: PGIM Private Real Estate Fund, Inc. Registration Statement on Form N-2 Filing Nos.: 333-259133 and 811-23739 Ladies and Gentlemen: On behalf of PGIM Private Real Estate Fund, Inc. (the “Fund”), please find the Fund’s Pre-Effective Amendment No. 1 (“Amendment No. 1”) to the above referenced registration statement of the Fund originally filed with the Securities and Exchange Commission (the “Commission”) on August 27, 2021, pursuant to the Securities Act of 1933, as amended (the “Securities Act”), and the Investment Company Act of 1940, as amended (the “1940 Company Act”) (the “Registration Statement”), through the Commission’s electronic data gathering, analysis and retrieval (“EDGAR”) system. In addition, we are providing the following responses to comments received by email from the staff of the Commission (the “Staff”) on September 29, 2021, relating to the Registration Statement. Please note that all page numbers in our responses are references to the page numbers of Amendment No. 1. All capitalized terms used but not defined in this letter have the meanings given to them in Amendment No. 1. General 1. Several pages of the prospectus contain blanks for missing disclosure, such as the fee table. Please insure that all missing information is included in a pre-effective amendment. We may have additional comments on such portions when you complete them in a pre-effective amendment. Response: The Fund has further updated its disclosure and will make further updates in later amendments. We acknowledge the Staff may have additional comments. 2. Please tell us if you have presented or will present any “test the waters” materials to potential investors in connection with this offering. If so, please provide us with copies of such materials. Response: The Fund has not presented any test the water materials to potential investors and does not anticipate doing so. 3. Please confirm that the Fund intends to rely on section 23(c)(2) of the 1940 Act and rule 13e-4 under the 34 Act in connection with any tender offers. Also, clarify whether the Fund in addition intends to conduct a repurchase program according to rule 23c-3 under the 1940 Act. Response: Confirmed that the Fund intends to rely on Section 23(c)(2) of the 1940 Act and Rule 13e-4 under the Exchange Act in connection with the tender offers contemplated in the Registration Statement. The Fund does not intend to conduct a repurchase program according to Rule 23c-3 under the 1940 Act. 4. We note that the registration statement discloses a number of requests for exemptive relief, both future and current (i.e., multi-class, fee arrangements, section 19(b), and co-investing). Please advise us as to the status of each of the applications disclosed in the registration statement and whether you have submitted or expect to submit any other exemptive applications or no-action requests in connection with the registration statement. Additionally, please (i) provide the order number for any exemptive relief that has been granted, and (ii) disclose, each time an application for exemptive relief which has not yet been granted is mentioned in the registration statement, that such relief is subject to Commission approval and there is no assurance the Commission will grant the relief. Response: The Fund filed an application for exemptive relief to offer multiple share classes on September 24, 2021 (File No. 812-15266). The Fund currently intends to also file for exemptive relief to permit co-investments with affiliates and also to permit the Fund’s investment manager to receive its fees in shares of the Fund, however, the Fund has not yet filed applications for these matters at this time. The Fund’s investment manager has received exemptive relief (File No. 812-13998) from Section 19(b) of the 1940 Act and Rule 19b-1 thereunder that permits the Fund to pay distributions from long-term capital gains more frequently than once per year. The Fund has added disclosure stating that relief that has not been granted is subject to Commission approval and there is no assurance the Commission will grant the relief. 2 Cover Page 1. As part of the discussion of the Fund on the cover page, please disclose what the Fund must distribute to its stockholders in order to qualify as a REIT. Response: The Fund has added disclosure on the cover page that in order to qualify as a REIT the Fund must distribute at least 90% of its REIT taxable income each year to its stockholders. 2. Please tell us if and how much the Fund will invest in private real estate funds that rely on section 3(c)(1) or 3(c)(7) of the 1940 Act. If the Fund will invest more than 15% of its net assets in private real estate funds that rely on sections 3(c)(1) or 3(c)(7), please note that registered closed-end funds that invest more than 15% of their net assets in such funds should impose a minimum initial investment requirement of at least $25,000 and restrict sales to investors that, at a minimum, satisfy the accredited investor standard. Please confirm to us that the Fund will invest 15% or less or that they will impose a $25,000 initial investment minimum and will limit investments to accredited investors. We may have additional comments after reviewing your response. Response: The Fund confirms that it will not invest more than 15% of its assets in private funds that rely on Section 3(c)(1) or 3(c)(7) of the 1940 Act. The Fund has added disclosure confirming this in the description of its investment strategies. 3. Please clarify whether the equity and debt investments mentioned as part of the Fund’s 80% policy are backed by real estate. Further, please elaborate on what is meant by “private transactions?” Response: The Fund has revised its disclosure to clarify that the 80% test includes equity investments in real estate or real estate related companies and debt investments backed by real estate or real estate related companies. The Fund considers transactions to be private if they are not executed on an established trading market. 4. Investment Strategies. If derivatives are counted towards the Fund’s 80% investment policy, please disclose here or in the body of the prospectus that derivatives are valued based on market value for this purpose. Please also specifically describe the types of derivatives in which the Fund can invest. Response: The Fund has disclosed in the Investment Objectives and Strategies section that derivatives are valued at market value for purposes of the 80% investment policy. The Fund has added disclosure stating that its derivatives investments may include options contracts, futures contracts, options on futures contracts, indexed securities, credit linked notes, credit default swaps and other swap agreements for investment, hedging and risk management purposes. 5. Investment Strategies. The Fund states that it will invest in, among other things, “net lease.” Please explain to investors what is meant by this term in plain English. The Fund also states that property level debt will be incurred by “operating entities.” Please provide further disclosure elaborating on what is meant by “operating entities.” 3 Response: The Fund has added disclosure explaining that “net lease” investments are properties leased to long-term tenants where the tenants have agreed to pay substantially all expenses related to the property, including taxes, insurance and maintenance. The Fund has added disclosure explaining that operating entities referenced are entities that own and manage real properties. 6. Please provide disclosure regarding up to how many shares the Fund intends to offer on a continuous basis. Response: The Fund has not yet determined the size of its offering and will disclose the size in a later amendment. 7. Please reformat the bolded paragraph regarding the lack of a secondary market as a bolded bulleted paragraph to further highlight this disclosure and add the following statement: An investment in the Fund may not be suitable for investors who may need the money they invest in a specified timeframe. Further, provide an internal cross-reference to the section of the prospectus addressing risk factors associated with leverage. Response: The Fund has updated its disclosure accordingly. The Fund has already provided an internal cross-reference to both “Leverage” and “Risks—Leverage Risks.” 8. Please add a second bolded bulleted paragraph to the cover page stating that: An investor will pay a sales load of up to [ ]% and offering expenses of up to [ ]% on the amounts it invests. If you pay the maximum aggregate [ ]% for sales load and offering expenses, you must experience a total return on your net investment of [ ]% in order to recover these expenses. Response: The Fund has updated its disclosure accordingly. 9. The Fund states that it expects to utilize property level debt financing and that such financing is composed of mortgages on Fund properties that are not recourse to the Fund except in limited circumstances. Please explain in plain English the meaning of the phrase: “not recourse to the Fund.” Response: The Fund has added disclosure explaining that property level debt that is not recourse to the Fund is debt where, in a default, the lender can only seek recovery from the property and cannot further pursue any recovery from the Fund or any of its other assets. Prospectus Summary 1. The Fund. Please also add disclosure to the first paragraph informing investors of the Fund’s registration status vis a vis the Securities Act of 1933. Response: The Fund has added disclosure in the Prospectus Summary that the Fund is offering its shares pursuant to an offering registered under the Securities Act of 1933, as amended. 4 2. The Offering. Please explain, supplementally, whether the Fund will offer one class of securities until it receives exemptive relief. If so, disclose what share class the Fund intends to offer. Response: The Fund confirms that it will offer only one class of shares unless and until it receives exemptive relief to offer multiple share classes. The Fund has disclosed it will offer Class I shares prior to receiving such exemptive relief. 3. Investment Management Agreement. Assuming the Fund receives multi-class exemptive relief, please disclose which class of shares serves as the basis for the incentive fee. Response: The Investment Manager’s incentive fee is calculated based on Portfolio Operating Income, which excludes distribution and servicing fees. As a result the incentive fee is calculated the same for all share classes. 4. Investment Process. The Fund states that “ESG considerations are embedded though the various stages of PGIM Real Estate’s investment process . . . .” Clarify whether such ESG screens are applied to all of the Fund’s investments or just a portion of its investments. Response: The Fund confirms that the referenced ESG screens will be applied to all of the Fund’s investments and has clarified that in the disclosure accordingly. 5. Repurchases. The Fund states that it intends to conduct quarterly tender offers. Please provide summary disclosure or an internal cross reference explaining the investor notification process for such tender offers. Response: The Fund has added in Repurchase of Common Stock that it will conduct its tender offers pursuant to Rule 13e-4 of the Exchange Act and will file a Schedule TO and related exhibits on EDGAR and deliver notifications to stockholders as required by Rule 13e-4. 6. Repurchases. Please reconcile the statements in this section: 1) the Fund intends, but is not obligated, to conduct quarterly tender offers; and 2) the Fund intends to comply with an exemption under FINRA Rule 5110 that requires the Fund to make at least two tender offers per calendar year. Clarify the consequence with regard to the FINRA exemption if it decides not to conduct a tender within a calendar year. Response: The Fund intends to conduct four tender offers per year, but is not obligated to do so. The Fund will comply with the exemption under FINRA Rule 5110 if it makes at least two tender offers per calendar year (such that the Fund could miss one or two or its intended four tender offers per year and still comply). The exemption under FINRA Rule 5110 would allow the Fund to use the compensation limits of FINRA Rule 2341 instead of FINRA Rule 5110. 7. Leverage. Explain more clearly the limitations on leverage are tied to the 1940 Act. Response: The Fund has added disclosure that it is limited to the leverage limits imposed by the 1940 Act. 5 8. Acquisition of Initial Portfolio. The Fund refers investors to the financial statements in SAI for more information about the Predecessor Fund. This is inadequate prospectus disclosure concerning the Predecessor Fund. Please provide further disclosure in the prospectus explaining the planned reorganization of the Predecessor Fund and the specifics concerning its current investments, objectives, and strategies. Please also disclose that the Predecessor Fund was not subject to the Investment Company Act and, thus, may have been managed differently than the Fund. Response: The Fund has disclosed that the Predecessor Fund was not subject to the 1940 Act and thus was managed differently than the Fund will be managed. The Fund agrees to provide this information on the predecessor fund in a later amendment. 9. Interest Rate Risk. Please include disclosure regarding the currently historically low interest rate environment and how that may impact the Fund and its investments. Response: The Fund has added the requested disclosure. 10. Periodic Tender Offer Risk. Please add summary risk disclosure that includes the potential tax consequences of share repurchases and related portfolio security sales to investors and to the Fund. Please also discuss the effect that share repurchase offers and related financings might have on expense ratios and on portfolio turnover. See Guidelines to Form N-2, Guide 2. Response: The Fund has added risk disclosure that share repurchases may result in disposing assets, which could increase portfolio turnover. The Fund notes that the Registration Statement already includes disclosure that the repurchase may result in a smaller base of assets resulting in an increase in expenses per share. The Fund has also added disclosure on the tax consequences of exchanging shares of Common Stock for cash pursuant to a tender offer. 11. Periodic Tender Risk. The Fund states that the use of leverage to finance the repurchase of Common Stock will further increase the Fund’s expenses borne by shareholders of the Fund, in