JLL Income Property Trust Launches 1031 Exchange Offering

CHICAGO—JLL Income Property Trust has launched a new 1031 tax-deferred exchange program geared at providing accredited investors with the opportunity to defer taxes on the gains from the sale of appreciated real estate.

The offering marks JLL Income Property Trust’s first entry into the 1031 exchange sector. The program by JLL Income, a daily NAV REIT, will be advised by institutional investment manager LaSalle Investment Management, Inc. and sponsored by the global leader in commercial real estate services.

The JLL Exchange program will offer a series of private placements through the sale of interests in Delaware statutory trusts (DSTs) holding real properties sourced from Income Property Trust’s portfolio or from third parties, the REIT states.

Since the company launched its core daily NAV REIT investment program seven years ago, financial advisors across its wirehouse, IBD and RIA distribution partners have been requesting a companion 1031 exchange offering, says Allan Swaringen, JLL Income Property Trust President and CEO. “The investors and platforms we work with are keen to see more institutional quality managers and offerings in the 1031 space come to market,” he said in prepared remarks.

The 1031 like-kind exchange market is expected to top $3 billion in originations in 2019, representing nine consecutive years of growth.

JLL says some of the benefits of the 1031 Like-Kind Exchange program include: JLL Income Property Trust’s institutional investment management platform and track record; access to higher quality, larger and a more broadly diversified property portfolio; long-term investment solution for investors no longer wanting to actively manage real estate and lower fees than typically charged to individual investors accessing the traditional 1031 marketplace.

Through its operating partnership, JLL Income Property Trust will offer beneficial interests in DSTs as “like-kind” property to investors. Each DST will be governed by a trust agreement to be entered into among JLL Exchange, LaSalle Investment Management, the company’s external advisor, the operating partnership, a Delaware resident trustee and investors of the DST, JLL explains.

Pursuant to each trust agreement, JLL Income Property Trust states that the operating partnership will retain a fair market value purchase option giving it the right, but not the obligation, to acquire the beneficial interests from the investors any time after two years from the closing of the applicable DST Offering in exchange for units of the operating partnership or cash. After a one-year holding period, investors who acquire OP Units generally have the right to redeem all or a portion of their OP Units for, at the company’s sole discretion, shares of the company’s common stock, cash or a combination of both.

LaSalle, as advisor to the program will be engaged to serve as the manager of each DST and will have primary responsibility for performing administrative actions in connection with the DST and any DST Property and generally has the discretion to determine when it is appropriate for a DST to sell a property, subject to the operating partnership’s option. The operating partnership of JLL Income Property Trust will hold an option to acquire the DST property at a future date in connection with each DST offering.

If the operating partnership exercises its purchase option, DST investors will automatically exchange their DST interests for units of the JLL Income Property Trust Operating Partnership, thereby converting their investments in a single DST asset into fractional ownership interests in an institutional-quality, diversified, $3 billion, 75 property portfolio of commercial real estate.

Outside of the new 1031 exchange program, JLL Income Property Trust earlier this month reported it acquired Presley Uptown, a newly developed 230-unit, Class-A apartment community in the Uptown submarket of Charlotte, NC for approximately $55 million.