Net-Leased Portfolio 24
The Net Leased Portfolio 24 brings together twenty-four freestanding retail properties with tenants with an average lease term of 12.1 years. Half of the building are triple net (NNN) leased and the other half are double net (NN) leased.
The properties are diversified across ten states (Wisconsin, Texas, Tennessee, Pennsylvania, Ohio, New Mexico, Iowa, Illinois, Georgia, and Florida) and ten tenants (Walgreens, Tractor Supply Co, Sherwin Williams, Pick ‘N Save, Fresenius, Dollar Tree, Dollar General, CVS, BioLife Plasma, Advance Auto Store).
- Year 1 Cash Flow 6.13%
- Initial Occupancy 100.00%
- Est. Time Horizon None
- Yr 1. Cap Rate to Investors 5.61%
- Investor Purchase Price $99,035,000
- Total Offering Size $44,870,000
The loan is interest-only and set at a fixed interest rate of 4.55% for a 10-year term. It is also non-recourse to the investor and set-up to enter a "Cash Sweep" should the Debt Service Coverage Ratio drop below 1.
- Yr. 1 DSCR 2.19
- Loan-to-Value 54.69%
- Hold Period DSCR 2.22
Significant diversification with 10 tenants spread across 10 states.
Of 24 properties, 21 have their leases guaranteed by investment-grade corporations.
Long-term average lease term of over 12 years.
Lease terms include scheduled rent bumps.
6 leases expire before the end of the 10 year holding period.
Leases that have fewer than 10 years remaining will drop the property's value as a buyer would hold less time of guaranteed income.
The cap rate (5.61%) is near the breakeven cap rate (5.56%).
Although only moderate leverage is used with an average DSCR of 2.22, the loan structure is interest only through the entire cycle.
Due to the property’s regional diversification, investors may need 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."