Jones Lang LaSalle Income Property Trust Explains Share Price Decline
April 3, 2020
In an 8-K filing with the SEC on April 2, 2020, the REIT explains the recent decline in net asset values per share. The following is directly quoted, without editing, from the filing:
The outbreak of the Novel Coronavirus (COVID-19) was declared by the World Health Organization as a “global health emergency” on the 30th of January 2020 and was then characterized as a pandemic in March 2020. COVID-19 has impacted global financial markets, severely restricted international trade and travel, disrupted business operations (in part or in their entirety) and negatively impacted most investment asset classes including real estate.
Over the last seven business days of the first quarter of 2020, JLL Income Property Trust’s (the “Company”) M-I share class declined $0.36, from $12.33 on Monday, March 23 to $11.97 on Tuesday, March 31, 2020. The aggregate decline in share price across all share classes was similar and approximated 3% over this time period.
One component of the net asset value (NAV) decline was the result of shares going ex-dividend on March 26, the day on which all stockholders of record earned the $0.135 quarterly dividend declared by the Board of Directors on March 3 for the first quarter of 2020. This decline, which accounts for approximately 40% of the overall share price movement during this time period, is consistent with the Company’s share price movement over the last thirty-three consecutive quarters of dividend payments.
The larger, approximately 60% component of the NAV decline equating to $0.22 which occurred across three business days during this period, was the net aggregate result of declines in the value of the Company’s portfolio properties as determined by RERC, LLC (formerly known as “Real Estate Research Corporation”), the Company’s Independent Valuation Advisor, and were the result of RERC’s assessment of near term impacts of the COVID-19 pandemic on specific properties.
This late March 2020 value decline totaled nearly $41 million and equates to an approximate 1.4% decline in JLL Income Property Trust’s approximate $3 billion gross asset value and an approximate 2% decline in net asset value. Property sectors most impacted were the Company’s:
• grocery-anchored retail portfolio, which includes twelve investments worth approximately $810 million and representing 27% of the overall portfolio, where revised appraisals reflected increased credit loss reserves, reduced future rental growth rates, reductions to percentage rent revenues and slower projected lease-up of vacant space;
• parking garages, which includes two investments worth approximately $39 million and representing 1% of the overall portfolio where revised appraisals reflected significantly reduced near-term revenue expectations;
• student-oriented apartment community, which includes one investment worth approximately $21 million and representing 0.5% of the overall portfolio, where revised appraisal reflected increased credit loss reserves, reduced future rental growth rates and increased near-term vacancy.
The NAV adjustment also includes an approximate $1.5 million reserve for due diligence costs and deposits associated with acquisitions in progress which may not be completed due to the changing economic environment.
Conditions exist in the real estate markets that may result in value uncertainty related to the impact of COVID-19. Consequently, less certainty – and a higher degree of caution – should be attached to valuations than would normally be the case.
Source: SEC
