Net-Leased Portfolio 14
ExchangeRight Net Leased Portfolio 14 is an investment into 17 retail net leased properties located in 7 different states with a total of 8 tenants. These tenants provide auto parts, healthcare, discount grocery, and pharmacy services.
- Year 1 Cash Flow 6.57%
- Initial Occupancy 100.00%
- Est. Time Horizon None
- Yr 1. Cap Rate to Investors 5.55%
- Investor Purchase Price $55,230,000
- Total Offering Size $27,120,000
The total loan on this portfolio is $28,110,000 from Bank of America National Association. The term is for a total of 10 years with the entire term being interest only. The Debt Service Coverage Ratio is 2.62 in year 1 and averages 2.71 during the hold period. The interest rate is a fixed rate of 4.061%.
- Yr. 1 DSCR 2.62
- Loan-to-Value 50.90%
- Hold Period DSCR 2.71
Due to the geographic and tenant diversification across the portfolio, investors will mitigate some risk associated with local market downturn or natural disaster.
The remaining lease term on a weighted average basis is for a total of 13.4 years . This is longer than the anticipated hold period of 10 years.
Rent escalations are contracted into individual leases for the tenants during the primary and extension terms.
Of the 17 properties in the portfolio, 14 of them are occupied and operated by investment grade tenants. This reduces the risk of default on rent payments.
The Cap Rate to investors is low (5.55%) and the breakeven cap rate is (5.68%).
Contracted annual rental increases may not be sufficient to recoup upfront costs of syndication.
There is no guarantee that tenants will renew or extend their leases after the current term expires. This may make this portfolio less attractive to buyers as there may be a limited number of years of guaranteed rent under the current leases.
The loan is Interest Only for the entire term which leaves a large amount of principle to pay upon sale. This will make it critical to sell the portfolio for more than the purchase price to return original capital to investors.
Due to the geographic diversification, investors may have to file multiple state tax returns.
According to the sponsor's website: "ExchangeRight Real Estate, founded in 2012, is a private real estate investment firm focused on the acquisition and management of single-tenant properties throughout the United States. With over $1.2 billion in assets under management diversified across 425 properties in 28 states, we focus on investment-grade, necessity-based retail and Class B/B+ value-added multifamily.
We believe that investors deserve an investment strategy that provides them with stable cash flow, capital preservation, and value-added return potential in the face of uncertain economic and financial conditions. We have implemented a strategy designed to directly address this so that we can preserve our investors' capital and provide attractive income on their capital until the timing is right to execute a strategic exit to maximize their returns."