JLL’s non-traded REIT launches on second wirehouse — Exclusive

JLL Income Property Trust, the non-traded real estate investment trust created six years ago by LaSalle Investment Management, launched on the Morgan Stanley Global Wealth Management Group platform last week, PERE has learned.

JLLIPT joins Blackstone and Black Creek Group’s products on the platform and is the second non-traded REIT to sell on multiple wirehouses. Black Creek launched on Morgan Stanley’s platform in December, PERE previously reported, while Blackstone’s product is also listed with UBS and Merrill Lynch. Non-traded REIT sponsors aim to sell through multiple wirehouses to avoid capital concentration compliance issues, which can lead platforms to limit the capital available for particular products, industry observers said.

LaSalle’s non-traded REIT has been sold on Merrill Lynch’s wealth management platform since September 2012, raising about $1.1 billion through the wirehouse, a source told PERE. The product is also sold through independent broker-dealers and registered investment advisers and in total has collected over $1.6 billion.

“This is the future for our business. There’s no better partner for us to have than Morgan Stanley, which gives us access to 15,600 financial advisors and the $2.4 trillion of assets they manage,” Jason Kern, LaSalle’s chief executive of the Americas, told PERE. “That’s not to say that the IBD and RIA channels are not important, but there’s clearly nothing better than the big wirehouses in terms of getting access to that $2.4 trillion.”

Kern said it was too early to predict how much capital the firm could raise through Morgan Stanley.

“Our expectations have to be tempered. We know more about this wirehouse space than just about anybody, and we know it is a long, gradual education process,” he said.

Kern added that the emergence of other non-traded REITs, including products managed by Starwood Capital Group, Oaktree Capital Management and TH Real Estate parent company Nuveen, help to institutionalize a newer version of a product that was earlier spurned by wirehouses for issues including heavy fee loads and lack of alignment.

“We have no false aspirations that it’ll be an immediate hit, but as we look forward to 2019, we expect to see a gradual pickup in sales,” he said. “I expect [Morgan Stanley] to be a little quicker pickup than Merrill Lynch, only because we were the only game in town back then. Now, we have very smart, capable competitors.”

At its 2013 peak, the non-traded REIT market raised $20 billion, but fundraising volume has steadily declined since then, falling to $4.5 billion last year, PERE previously reported.