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JLL Income Property Trust Books $107 Million Gain on Sale of San Francisco Office Building

Jones Lang LaSalle Income Property Trust Inc., an institutionally managed daily NAV REIT (NASDAQ: ZIPTAX; ZIPTMX; ZIPIAX; ZIPIMX), has sold a historic multi-tenant office building located in San Francisco, California.

Jones Lang LaSalle Income Property Trust Inc., an institutionally managed daily NAV REIT (NASDAQ: ZIPTAX; ZIPTMX; ZIPIAX; ZIPIMX), has sold a historic multi-tenant office building located in San Francisco, California for $227 million, less closing costs. The property, located at 111 Sutter Street, was purchased by Paramount Group Acquisition and Development LLC.

In connection with the disposition, the mortgage loan associated with the property totaling approximately $52.5 million was retired. The REIT said that it expects to record a gain of approximately $107 million from the sale.

Known as the Hunter-Dulin Building, the 286,000-square-foot property is located in the North Financial District of San Francisco and listed on the National Register of Historic Places.

Built in 1926 and renovated in 2001, 111 Sutter Street was jointly owned by JLL Income Property Trust and Ellis Partners from 2005 until December 2015, when the REIT paid $22 million for the remaining 20 percent stake held by Ellis Partners.

At a sale price of $227 million, this asset had appreciated to nearly 10 percent of the portfolio, the company noted. With near record pricing for the San Francisco market, the asset closed at more than two times the initial acquisition cost.

“The iconic 111 Sutter building has been a cornerstone of our portfolio since we launched JLL Income Property Trust in 2012,” said Allan Swaringen, president and CEO of JLL Income Property Trust. “It has been one of our best performing investments over the last seven years. That said, in keeping with our core investment strategy, we’ve sold over $730 million and more than 30 properties, harvesting gains and reinvesting in properties and markets that we believe represent better risk-adjusted opportunities for our investors.”

Swaringen added, “Recognizing we are later in the cycle, we believe it is essential to be a timely seller as well as a disciplined acquirer. In keeping with our de-risking portfolio strategy, we have been underweighting our allocation to office properties and focusing on property types that historically have required less ongoing capital investment and have generated more free cash flow from operations.”

Proceeds from the sale will be reinvested across a number of other properties and geographic markets.

A joint venture between Ellis Partners and Cargill Inc. originally purchased the property in 1999 for $45 million, and the pair invested roughly $30 million into its renovation. JLL Income Property Trust reportedly paid $24.6 million in 2005 for Cargill’s 80 percent stake.

Jones Lang LaSalle Income Property Trust owns and manages a $2.7 billion portfolio of 70 office, retail, industrial and apartment properties located primarily in the United States. Since 2012, the company has raised a total of approximately $1.6 billion through its ongoing public and various private offerings, as well as its distribution reinvestment plan.

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