This morning, private REIT JLL Income Property Trust will announce its purchase of a 324-unit, Class A property in a suburban Portland, Ore., community.
The approximately $75 million deal for Jory Trail at the Grove in Wilsonville reflects an increased magnetic draw, for both investment capital and strategic property portfolios, away from urban cores to the suburbs, where competition is rare and where future growth—and scenarios for rivals to crowd in are highly unlikely—is under tight control of local governments.
Further, solid, stable neighborhoods convenient to downtown job centers and supported by strong school systems cap off the suburban appeal.
What's more, for JLLIPT, a LaSalle Investment Management unit whose portfolio includes 70 properties with an asset value of $2.4 billion diversified across income-producing office, retail, industrial and apartment properties, the move aligns with a recent emphasis on apartments as a focus for near- to mid-term cash-flow growth.
Allan Swaringen, president and CEO of JLL Income Property Trust, notes that the Jory Trail acquisition represents the firms ninth apartment deal, bringing its aggregate apartment allocation to 2,100 units, valued at nearly $600 million and 25% of its overall property portfolio by valuation.
"In fact, apartments have been more than 50% of our property acquisitions over the past two years," says Swaringen. "We believe the lease structure and long-term hold on special assets like this one are what can give us growth that outpaces inflation."
Swaringen notes that the Jory Trail deal maps JLLIPT into an expanded footprint, adding the Pacific Northwest to a portfolio that already includes Philadelphia, San Diego, and St. Paul, Minn.
"We see a lot of value and opportunity in 24/7-like second-tier cities, and in the suburbs of those cities, where, if we buy into a market, we're not going to see thousands of units coming in behind us," says Swaringen.
Indeed, Zelman & Associates spotlights the suburban opportunity for multifamily in its latest issue of The Z Report, in an analysis titled, "Urban Core a Drag on Apartment Growth While Capital Interest Heading to Suburbs." The report notes:
"In the suburbs where value-add opportunities are more prevalent and new construction supply is fairly depressed, investment capital remains deep, according to our contacts."
JLLIPT expects its acquisition of properties like the Jory Trail deal to continue, with a 10th deal, in the Southeast, likely to close in the next couple of weeks.
"We like markets like Portland for the way they fit our focus on 'Next Tech' arenas," says Swaringen. "That's definitely one of our strategic themes as we look at further opportunity."
Here are the key parts of the press statement released this morning.
JLL Income Property Trust, an institutionally managed, daily valued perpetual life REIT (NASDAQ: ZIPTAX; ZIPTMX; ZIPIAX; ZIPIMX), today announced the acquisition of Jory Trail at the Grove, a premier 324-unit apartment complex that is 95% leased. The Class A apartment property is located in the Portland, Oregon suburb of Wilsonville. The purchase price was approximately $75 million.
Wilsonville is a thriving suburb of Portland that features a robust apartment market, low market vacancy and no multifamily units under construction or planned in the submarket. The suburb is conveniently located along the I-5, providing access to some of greater Portland’s major employment centers and is home to Xerox, Mentor Graphics, Rockwell Collins and Tyco. Wilsonville, which has attracted a growing population of affluent families, also offers an exceptional public school system that Niche.com and US News & World Report have ranked as a top school system both locally and nationally. Wilsonville’s strong employment base and high barriers to entry should result in continued strong demand and future rent growth.
“The acquisition of Jory Trail at the Grove demonstrates JLL Income Property Trust’s strategy to invest in high- quality apartment assets in strong-performing areas featuring a combination of top incomes and school districts,” said [Swaringen]. “Jory Trail is our first multifamily acquisition in the Pacific Northwest, and we continue to focus our apartment investment strategy on submarkets that showcase stability, growth and have high barriers to entry.”
