JLL Income Property Trust Celebrates Five Years: A Conversation with Allan Swaringen
December 11, 2017 | Beth Glavosek | Blue Vault
After building an admirable track record providing pension funds and endowments with high quality, diversified core real estate, industry giant LaSalle Investment Management saw an opportunity to bring its 40 years of institutional experience to individual high-net-worth investors. JLL Income Property Trust was thus founded in 2012 as an advised real estate investment trust (REIT) managed by LaSalle Investment Management and sponsored by JLL.
However, this wasn’t just another non-listed REIT entering the market. “We weren’t looking to create a new or ‘better’ nontraded REIT,” says Allan Swaringen, President and CEO of JLL Income Property Trust. “We wanted to build something completely different that had never been done before.”
A pioneer in perpetual life REITs
JLL Income Property Trust was designed as a daily valued, perpetual life REIT, a concept of which company stakeholders and the advisor community were initially skeptical. “We are not like more traditional offerings that would open, sell shares, close, and liquidate or list at some point,” Allan explains.
Daily valuations – how are they possible?
JLL Income Property Trust publishes a daily net asset value (NAV) as a transparent means of communicating with stockholders. Calculating a daily NAV is a task that JLL Income Property Trust already had covered with their existing procedures. “This part was easy for us because we’re used to our institutional clients requiring regular valuations at the end of each quarter,” Allan says. “Since we had historically performed quarterly portfolio valuations, it was simply a matter of evenly spreading the appraisals throughout the quarter for this product instead of valuing all of the properties at once.”
Allan notes that with 69 properties today and roughly 70 business days in a quarter, this schedule equates to one property appraisal per day on a rolling basis. The daily NAV is then posted each day on the REIT’s website. It’s evident that the REIT’s valuation process is working. Allan says that all of the 23 properties JLL Income Property Trust has sold since its inception closed at a price within plus or minus 1% of its last valuation. “These sales affirm our process and that our properties have been brought to market at a fair price and that their valuation in our daily NAV was also fair,” he says.
It’s worth noting that JLL Income Property Trust uses an independent, third-party Member of the Appraisal Institute (MAI) appraiser who maintains an ‘arm’s length’ view of the REIT’s assets.
What about liquidity?
Allan says that it’s important to not oversell the REIT’s liquidity. It is still a long-term hold that investors should expect to leave alone for five to seven years. “JLL Income Property Trust should never be considered as a trading vehicle,” Allan says. “Investors shouldn’t confuse daily valuations with daily liquidity.”
That said, liquidity options are broader than traditional non-listed REITs and are not limited to the proceeds from a Dividend Reinvestment Plan (DRP). After an initial one-year holding period, stockholders may request on a daily basis that the company repurchase all or a portion of their shares. There are also provisions in place for accommodating situations of death or disability.
While stockholders are entitled to request share repurchases, these repurchases are limited each calendar quarter to 5% of the REIT’s total NAV. “We haven’t hit this limit to-date, but there’s always the possibility that we could,” he says. Given our size this current limit is around $75 million.”
Regulatory foresight
Although launched before the introduction of FINRA 15-02 and the Department of Labor’s efforts to implement a uniform fiduciary standard, JLL Income Property Trust’s visionary concept was structured in such a way that it is not really impacted by these requirements.
Other fast facts about JLL Income Property Trust
- Key stats. The REIT had an advantage in not starting as a blind pool. It was started with a substantial portfolio seeded by the parent company just five years ago. Today, JLL Income Property Trust owns 69 properties, and the REIT has about $2.5 billion in total asset value (at fair value).
- Diversification. The REIT invests in the four core sectors of retail, industrial, apartments, and office. Focusing on more than one sector allows the REIT to over-or-under-weight portfolio holdings according to its research-based outlook, and it is not dependent solely on one sector’s returns.
Imitation is the sincerest form of flattery. While JLL Income Property Trust was the first to create a perpetual life advised REIT that gained distribution through the wirehouse channel, others have recently caught on. Three other large multi-national investment managers have observed the REIT’s success and emulated its model in the last 18 months.
For more information about JLL Income Property Trust, visit http://www.jllipt.com.
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