JLL Income Property Trust, a daily NAV real estate investment trust, has purchased Fountainhead Corporate Park, a 300,000-square-foot, two-building Class A office portfolio located in the Phoenix, Arizona submarket of Tempe.
The property was purchased for $61.5 million, or approximately $205 per square foot, which the REIT claims is a “significant discount to new construction costs in the Phoenix market.”
This is the fifth asset the REIT has purchased in the Phoenix metro area over the past three-and-a-half years, representing $246.5 million of total investment.
Fountainhead Corporate Park is located within a master-planned community that contains Class A office space, multifamily communities, retail and hotels. It is leased to a diversified mix of tenants such as First American Title Company, State Farm Insurance and Coca Cola, as well as financial institutions, engineering firms, tech companies and academic institutions with a weighted average lease term of more than five years.
The two buildings recently underwent a $4.5 million refurbishment program that included renovations of the lobbies, common areas, elevators and roof replacements.
Arizona’s economy ranks second in the nation for job growth, third in the nation in GDP growth, and fourth in fastest growing states in the US, the REIT noted. Nearly 300,000 jobs have been added in Arizona since 2015, with expectations to create an additional 70,000 jobs in 2020.
According to Green Street Advisors, the Phoenix office market is ranked 4th nationally for estimated demand and employment growth from 2019 to 2022. Tempe is Phoenix’s top performing office submarket posting vacancy rates in the single digits over the past 8 years and hitting an all-time low of 3.3% in 2019.
“The JLL Income Property Trust portfolio today exceeds $3.1 billion in assets with a significant underweight to traditional office properties at just 7 percent – a property sector that some estimate to be 40 percent of the commercial property investable universe,” said Allan Swaringen, President and CEO of JLL Income Property Trust.
“While we intend to maintain an underweight to the office sector, this investment at an over 40 percent discount to replacement cost and with in-place rents well below current market comparables presents an attractive addition to our portfolio. Further, asking rents in this submarket have grown by an astounding 50 percent over the last five years and Tempe continues to boast strong market fundamentals.”
JLL Income Property Trust (NASDAQ: ZIPTAX; ZIPTMX; ZIPIAX; ZIPIMX) owns and manages a multi-billion-dollar portfolio of apartment, industrial, office and retail properties located in the United States. The REIT has raised approximately $1.9 billion through its ongoing public and various private offerings, as well as its distribution reinvestment plan.