Net-Leased Portfolio 16
ExchangeRight Net Leased Portfolio 16 is an investment in 19 single tenant retail properties that are leased and occupied by 7 different tenants in 9 different states. These tenants provide necessity products such as healthcare, prescriptions, auto parts, and discount grocery.
- Year 1 Cash Flow 6.78%
- Initial Occupancy 100.00%
- Est. Time Horizon None
- Yr 1. Cap Rate to Investors 5.64%
- Investor Purchase Price $61,252,000
- Total Offering Size $28,530,000
The total loan is $32,722,000 from Barclays Bank PLC. The term is for a total of 10 years with the entire term being interest only. The interest rate is fixed at a rate of 3.978%.
- Yr. 1 DSCR 2.58
- Loan-to-Value 53.42%
- Hold Period DSCR 2.59
Rent escalations are contracted into the leases and will occur during the original lease as well as the potential options that are available to each tenant.
The remaining average lease term is for 13 and there are options to extend this lease for each tenant.
Of the total of 19 properties, 15 of them are occupied by a company with an investment grade or have a parent corporation with an investment grade.
The properties are located in 9 different states and there are 7 different tenants which provides a level of geographic and tenant diversification that mitigates geographic risks.
The loan on the portfolio is interest only for the entire term of the loan which means it may be more difficult to sell the properties for a price that will allow investors to get a return after the loan is payed off.
Due to the geographic diversification in the portfolio, investors may have to file multiple state tax returns.
The cap rate to investors is low (5.64%) and the breakeven cap rate is (5.47%) Due to this, it is possible that the sales price of the property may not be able to recoup the costs of syndication.
Executing a sale at a profitable value may be difficult as the remaining lease term decreases below 10 years. Tenants may choose to not renew their leases which will make it more difficult to sell should there be no tenant in place when ExchangeRight looks to sell the properties.
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."