JLL Rolls Out New Nontraded REIT Focused On Debt

JLL launched a nontraded REIT focused on commercial real estate debt that complements its existing equity REIT.

The global brokerage giant this month filed to register common shares of JLL Property Finance Trust with the U.S. Securities and Exchange Commission. The nontraded REIT will be based in Maryland and will focus on the origination, acquisition, management and disposition of real estate debt. 

The perpetual REIT will primarily invest in debt-backing assets in multifamily, industrial, certain retail, self-storage, industrial outdoor storage, single-family rental, senior housing, life sciences, manufactured housing, mixed-use and healthcare. It will invest in ground leases, net leases, cold storage, data centers and other property types on a more limited basis, according to the SEC filing. 

JLL Property Finance Trust may also put some capital to work in CMBS and collateralized loan obligation investments.

Shares are being offered through a blind pool, meaning the REIT doesn’t yet hold any investments, and on a continuous basis, instead of the registered public offerings that nontraded REITs often use to distribute shares. 

LaSalle Investment Management has an advisory agreement to operate JLL Property Finance Trust, which is part of the larger JLL parent company that includes JLL Income Property Trust, its existing nontraded REIT that invests in real assets. 

The new debt REIT expects to operate with between 60% and 80% leverage once it has substantially deployed capital. It is targeting loan-to-value ratios between 60% and 75% on senior, core-plus loans, and up to 85% LTVs on subordinated positions. 

Redemptions for all shares are limited to 5% of net asset value per quarter, and shares held for less than a year will be redeemed at 95% of NAV.

LaSalle Investment Management CEO Bradley Gries is interim CEO of the new REIT, with JLL Income Property Trust Chief Financial Officer Gregory Falk also acting as CFO for the new REIT. 

The launch of a debt REIT comes against a backdrop of rising loan distress as some landlords struggle to refinance mortgages at today’s interest rates while remaining profitable. 

The CMBS special servicing rate climbed 33 basis points to 11.42% in August, reaching its highest level since 2013, with 16.9% of office loans and 13.6% of large mall debt in special servicing, according to Trepp.

Borrowers with loans from 2020 or earlier are grappling with the rising cost of refinancing a loan with relatively low interest rates to one priced against a 10-year Treasury yield hovering around 5%, its highest level since 2007.

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