Letter to Stockholders – February 19, 2021
February 19, 2021 — Chicago
Dear JLL Income Property Trust Stockholders,
After more than a decade of strong investment performance as an asset class, real estate faced numerous COVID-induced threats in 2020. Fortunately, real estate’s moment of crisis from the pandemic turned out to be short-lived and ultimately less harmful than many “higher-frequency” warning lights initially signaled. Listed REITs plummeted 44% from mid-February to mid-March. Foot traffic at malls fell by more than 80%. Investment-grade corporate bond yields gapped out by over 50% during a two-week period in March. Office building utilization in our largest cities fell by 90%. In response to all this, and as veteran real estate investors instructed by the lessons of previous market downturns, in particular the 2007/2008 Global Financial Crisis, we implemented well-honed defensive strategies geared towards protecting principal, preserving liquidity, and sustaining cash flows.
The impacts to property income streams proved to be less severe than initially feared and the entire asset class has not suffered losses of near the magnitude resulting from prior recessions. Moreover, well-located institutional-quality assets in the four primary property sectors in which we invest have shown higher resilience than lower quality, poorly-located properties or specialty property sectors such as hospitality, gaming, senior housing, student housing, and malls. The fundamental reason for including real estate in a mixed-asset portfolio is its long-term performance, which, thankfully, was not undone by COVID-19.
As the longest-tenured daily NAV REIT in the industry, we are proud of the resiliency JLL Income Property Trust exhibited in 2020. We are also excited to be investing now at the start of a new cycle – especially as real estate cycles have been trending longer as our asset class continues to mature with enhanced transparency across both public and private markets. Since inception in October 2012, JLL Income Property Trust has delivered attractive total returns with a 6.4% annualized net return all the while focusing on core, stabilized lower-risk investments. While our one-year annual net return last year was negative 0.7%, we outperformed the institutional index for core properties that operate with the same rigorous quarterly independent third-party valuation processes that determine our daily NAV.
Our annualized dividend yield was 4.6% as of year-end and has now been paid for 36 consecutive quarters with a 4.1% annualized growth rate. Our tax efficiency this year was better than our long-term average expectations with approximately 57% of dividends being treated as return of capital and 43% as long-term capital gain. Since 2012, for nine tax years, our cumulative dividends paid of over $400 million have been 70% return of capital and 30% long-term capital gains, both characterizations providing investors with significant tax benefits. It bears repeating – the fundamental reason for including real estate in a portfolio is long-term performance.
In reviewing last year’s results, there are three main points to highlight:
- First, in what was clearly a challenging year for real estate due to a 3.5% decline in GDP and 10 million jobs lost, higher quality properties in better markets maintained value and generated consistent, positive cash flows. The JLL Income Property Trust portfolio had two-thirds of its investments in what proved to be pandemic-resistant property sectors – industrial, apartments and healthcare-related office – principally medical office. Going forward, as we now accelerate our acquisitions pace, we intend to allocate further to these more resilient property sectors.
- Second, we remain committed to our core investment and operations strategy. However, as we shift from a late-cycle, more defensive positioning to an early-cycle, post-pandemic environment – the outlook for a strong economic recovery has resulted in us shifting to more of an offense-driven investing pace along with implementing moderately higher leverage – going from 35% to 45% LTV over the next twelve to twenty-four months, though still with a bias for capturing these historically low, long-term fixed interest rates.
- Third, our research-led portfolio investment strategy resulted in a highly productive fourth quarter 2020, closing three new acquisitions across the industrial and apartment sectors investing in excess of $155 million. We’ve also had our most active first quarter ever in 2021, expanding our portfolio with three new acquisitions across the industrial and healthcare sectors on pace to close upwards of $230 million of new investments.
Ultimately, for 2020, we experienced modest impacts to our rent collections due to COVID – those impacts continued to abate throughout the year. Overall, after rent deferrals, we collected approximately 98% of rents in 2020, and the limited rent deferrals should provide for improved cash flows in 2021.
We look forward to providing you with a more comprehensive review of 2020 and outlook for 2021 in my annual stockholder letter and proxy filing later this year. It is also not too early to remind you that we need you to vote your shares in our annual election of our board of directors. Please visit www.jllipt.com for recent updates on our portfolio, performance and proxy voting.
As market conditions improve, COVID impacts decline and the US economy enters a strong recovery period, we are focused on enhancing investment performance in the current year, and beyond, while also keeping our employees and tenants safe and supporting the communities in which we work and invest. I am extremely proud of our team’s tireless efforts focused on preserving and protecting our portfolio during incredibly challenging working conditions. I want to thank my team for their dedication and efforts, and you for being patient, loyal stockholders.
Sincerely,
C. Allan Swaringen
President & CEO
JLL Income Property Trust
About JLL Income Property Trust, Inc., Inc. (NASDAQ: ZIPTAX; ZIPTMX; ZIPIAX; ZIPIMX)
JLL Income Property Trust, Inc. (NASDAQ: ZIPTAX; ZIPTMX; ZIPIAX; ZIPIMX), is a daily NAV REIT that owns and manages a diversified portfolio of high quality, income-producing apartment, industrial, grocery-anchored retail, healthcare and office properties located in the United States. JLL Income Property Trust expects to further diversify its real estate portfolio over time, including on a global basis.
About LaSalle Investment Management
LaSalle Investment Management, Inc. a member of the JLL group and advisor to JLL Income Property Trust, is one of the world’s leading real estate investment managers with approximately $86.6 billion equity and debt investments under management (as of Q3 2023). LaSalle’s diverse client base includes public and private pension funds, insurance companies, governments, corporations, endowments and private individuals from across the globe. LaSalle sponsors a complete range of investment vehicles including separate accounts, open and closed-end funds, public securities and entity-level investments. LaSalle is a wholly-owned, operationally independent subsidiary of Jones Lang LaSalle Inc. (NYSE: JLL), one of the world’s largest real estate companies. For more information please visit www.lasalle.com.
Forward Looking Statements
This press release may contain forward-looking statements with respect to JLL Income Property Trust. Forward-looking statements are statements that are not descriptions of historical facts and include statements regarding management’s intentions, beliefs, expectations, research, market analysis, plans or predictions of the future. Because such statements include risks, uncertainties and contingencies, actual results may differ materially from those expressed or implied by such forward-looking statements. Past performance is not indicative of future results and there can be no assurance that future dividends will be paid.