JLL Income Property Trust Diversifies into Private Credit with $27 Million Multifamily Mortgage Loan
JLL Income Property Trust, a daily net asset value non-traded real estate investment trust with $7 billion in portfolio assets, announced that it originated a $27 million floating rate first mortgage loan secured by a newly constructed, institutional quality apartment community in suburban Austin, Texas.
JLL says the loan has an initial three-year term and earns an interest rate of 2.95% above SOFR, the Secured Overnight Financing Rate, and is currently projected to deliver a yield of between 7% to 8%. The company says that in an environment where traditional real estate debt sources are facing balance sheet and legacy portfolio challenges resulting in significantly curtailed lending, JLL Income Property Trust is diversifying beyond its traditional private equity pursuits into private credit, while maintaining its core-focused investment strategy.
By directly sourcing floating rate, senior secured real estate loans that “complement and further diversify” its multi-sector property portfolio, JLL Income Property Trust says it intends to capitalize on the current void in the debt capital markets, targeting accretive investments that also enhance investment performance. The company says underwriting real estate credit is a core competency of its advisor, LaSalle Investment Management, which has originated more than $5 billion of real estate loans globally and have 20-plus years of experience in real estate debt investing across multiple economic cycles.
“Diversifying JLL Income Property Trust’s investments beyond private and public equity, and into that third quadrant of private debt, is an undertaking begun several years ago and was envisioned when we launched IPT 11 years ago,” said Allan Swaringen, president, and CEO of JLL Income Property Trust. “JLL and LaSalle’s global expertise in debt capital markets is well known and highly regarded around the world. However, until the Fed recently handed us a double-edged sword of higher interest rates coupled with stress among regional banks and foreclosures in office, mall and hotel property sectors that widened credit spreads – returns on real estate debt had been compressing for years and, on a risk-adjusted basis, were below our targets. The economics of private credit have now swung dramatically in favor of investors, and we intend to seize on this opportunity for our stockholders.”
Swaringen also noted, “With a preferential position to the substantial equity invested in this property, we believe this floating rate, senior secured loan has structural downside protection while also delivering attractive, durable income, along with meaningful diversification to our core equity portfolio. We intend to originate a diversified portfolio of similarly structured loans with strong sponsorship in attractive markets. Over time, we aspire to grow a meaningful allocation to floating rate loans that complement our equity investments, enhance cash flows, support our dividend growth ambitions, and provide attractive risk-adjusted returns for our investors. Over our 11-year history, actively managing our portfolio allocations to LaSalle’s Research and Strategy group’s ‘best ideas’ has been a strong contributor to JLL Income Property Trust’s investment performance.”
Recently constructed and nearly 90% leased, the property securing the loan consists of 191 units spread across two four-story residential buildings. JLL says it features a wide range of amenities. Approximately 20 miles from Austin’s central business district, the community is in an area surrounded by major employers including the University of Texas, Dell Technologies, Apple and Tesla among others. The location is near restaurants, retail stores, a farmer’s market and a super-regional shopping mall.
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