Net-Leased Portfolio 20
ExchangeRight's latest Net Leased Portfolio has 16 retail properties. These properties are located in 8 different states and have 9 different tenants. These tenants provide discount grocery, auto care, specialty healthcare, farming supplies, and pharmacy. These properties are 100% net leased with contracted rents for the investments hold period.
- Year 1 Cash Flow 6.50%
- Initial Occupancy 100.00%
- Est. Time Horizon None
- Yr 1. Cap Rate to Investors 5.61%
- Investor Purchase Price $71,007,000
- Total Offering Size $32,550,000
The loan on the portfolio is from Societe Generale and has a term of 10 years. The fixed interest rate is 4.202% and there will be interest only payments for the entire 10 year term on the loan. The total loan amounts to $38,457,000.
- Yr. 1 DSCR 2.38
- Loan-to-Value 54.16%
- Hold Period DSCR 2.43
Average remaining lease term of 13 years which exceed the projected hold period of 10 years.
Tenants are diversified across 8 different states and the portfolio has 9 different tenants allowing for mitigated risk should a geographic area be subject to natural disaster.
Contracted rent escalations during the 10 year hold period allow for increases in cash flow throughout the term.
13 of 16 (81.25%) tenants have an investment grade credit rating from either S&P or Moody's.
The Cap Rate to investors is low (5.61%) and the breakeven cap rate is (5.57%).
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."