Net-Leased Portfolio 5
AEI Net Lease Portfolio 5 is an investment into three single tenant net leased retail properties. The properties are leased and operated by Hobby Lobby, Fresenius Medical Care, and BioLife Plasma Services. This is an All-Cash investment with NN leases on each property.
- Year 1 Cash Flow 7.50%
- Initial Occupancy 100.00%
- Est. Time Horizon None
- Yr 1. Cap Rate to Investors 6.36%
- Investor Purchase Price $23,470,000
- Total Offering Size $11,980,000
- Yr. 1 DSCR None
- Loan-to-Value 48.96%
- Hold Period DSCR 2.36
The remaining lease term is 14.7 years and rent escalations are built into each lease. One lease has rent escalations each year.
The healthcare properties are located in states with a high percentage of obesity. This will increase the potential patient pool for Fresenius Medical Care as well as BioLife Plasma Services.
Fresenius Medical Care and BioLife Plasma Services are owned by investment grade parent companies while Hobby Lobby, although non-investment grade, is a large company with revenues of over $3 Billion.
The leases on these properties are NN, which means that the trust may be responsible for some costs associated with maintenance of the properties. If roof or structural repairs are necessary, the cost could be significant and may be the responsibility of the trust.
Due to the geographic diversification, investors may need to file multiple state tax returns for each investment.
It is possible for the properties to be sold at a price for less than purchase. This is due to the possibility of the leases not being extended and the trust completing a sale with less than 10 years remaining on the leases for these properties. However, the trust has the ability to sell the properties at any time should they feel they can maximize value.
The upfront load is high (15.48%) which means less of the investors money is going into the investment and being swept by the sponsor and costs of syndication. This may make it difficult to recover these costs upon sale of the property.
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."