Armed With $1B In New Credit, JLL Income Property Trust Ready To Deal

JLL Income Property Trust has lined up a substantial new line of credit to place fresh bets on a possible recovery in some sectors of commercial real estate.

Earlier this month, the nontraded REIT secured a $1B credit facility with a syndicate of 10 lenders.

The credit facility contains a $600M revolving credit line and a $400M term loan with the option to increase the facility up to $1.3B. The facility has a two-year term and three one-year extension options.

The company can use the new liquidity to be a competitive player in what JLL IPT CEO Allan Swaringen says is the early days of a market upswing.

"It's a very powerful tool, especially in a more competitive real estate environment, for us to execute our investment strategy and to acquire properties," Swaringen said.

The lenders in the syndicate are JPMorgan Chase, Bank of America, Capital One, PNC Capital Markets, Wells Fargo Securities, BMO Bank, Fifth Third Bank, Regions Bank, TD Bank and The Bank of New York Mellon.

Stabilizing valuations and interest rate cuts have opened new opportunities to grow JLL’s portfolio, Swaringen said.

Most nontraded REITs have run against the wind in the last couple of years as interest rates rose. These REITs were forced to contend with both high redemption requests and a tightening capital marketplace. Many were forced to tighten limits on redemptions to preserve liquidity.

Market conditions have begun to loosen up as interest rates have fallen, and several companies have been able to clear out their redemption request queues while also seeking out new capital.

This month, Blackstone Real Estate Investment Trust reported it quadrupled its return rate. For the first time in roughly three years, it recorded net inflows.

JLL IPT didn't have as hard a time with redemptions and liquidity as other nontraded REITs during the lean years, Swaringen said. In Q4, it raised roughly $440M with some 8.9 million redemption requests satisfied. As of the end of December, the firm honored 100% of the requests received.

"I think part of it is we're one of the more conservative [net asset value REITs] out there," Swaringen said.

The new credit line brings with it new flexibility. Unlike secured financing that could be attached to specific assets, this credit facility falls under the unsecured financing bucket, which allows JLL IPT resources to seek out new investments using revolving credit at a low cost.

"The credit facility is a great tool for us to acquire something and then go to the market and put a fixed-rate financing on that property and then pay back the revolver," Swaringen said.

The credit will be used to meaningfully boost the REIT's growth, he said. JLL IPT has roughly $6.9B in portfolio equity and debt investments across sectors, including industrial, multifamily, retail and healthcare.

The REIT made two acquisitions in healthcare in the last few months. It acquired a 53K SF healthcare facility earlier this month in Greater Boston. The firm paid $32M for the single-tenant property. In December, it bought a 133K SF healthcare facility in Tampa, Florida, for $21M. This facility also has a single tenant.

Healthcare-oriented properties only make up about 10% of the portfolio, but Swaringen said the firm plans to increase its holdings of medical office buildings and life sciences facilities. The REIT is taking a location-specific strategy for these properties, focusing on high-density locations and highly skilled workforces. 

"The long-term demographic trends of the aging population of America definitely support healthcare-oriented real estate," Swaringen said. "Life science building, which has also struggled for the last two or three years, seems to be definitely shoring up, and occupancies are improving."

The REIT is also targeting grocery-anchored shopping centers in suburban and urban locations. In January, it bought a 115K SF retail center in Huntsville, Alabama, for approximately $32M. The center is 100% leased.

Swaringen said retail locations usually perform fairly well when they have a strong grocery tenant. Industrial properties are also on the REIT's radar, especially last-mile logistics centers near reliable transit hubs, including airports, seaports and train lines.

One area that the firm isn't as bullish on is the multifamily sector, despite the asset class still accounting for 35% of the company's portfolio. Swaringen said the REIT has no plans to pull out of the multifamily marketplace, but it is “paring back” its multifamily portfolio and deploying capital elsewhere.

In February, the REIT sold a 319-unit apartment community in McLean, Virginia, for $144.5M, according to property records. The company bought the property for $120M in 2021.

A month before, it sold a 180-unit luxury coastal apartment community in San Diego for $91M. The company bought the property in 2016 for $90M.

Swaringen said multifamily properties in strong markets can trade well and that capital can be recycled into other assets for favorable cap rates.