Analysis of Investments

Net Lease Portfolio 11

AEI

This offering is for four all cash retail properties in Georgia, Indiana, and Washington. The Tenants will be DaVita, Tractor Supply, and BioLife.

Investment Highlights

  • Yr. 1 Cash-on-Cash 5.04%
  • Initial Occupancy 100.00%
  • Est. Time Horizon None YEARS
  • Current Cash Flow
  • Yr. 1 Cap Rate to Investor 5.05%
  • Investor Purchase Price $20,625,000
  • Total Offering Size $20,625,000

Loan Information

All-cash; loan N/A

  • Yr. 1 DSCR None
  • Loan-to-Offering 0.00%
  • Hold Period DSCR None

Tenant Information & Lease Terms

The weighted average of the remaining lease term is 13.7 years, with the first lease expiring in 2031. All lease terms are Triple-Net. 

BioLife Plasma (rated BBB- by S&P) is a biotechnology company based in Dublin, Ireland. The company focuses on serving people with specialized conditions and rare diseases. 

DaVita (rated BB by S&P) is a leader in dialysis services in the United States. With 2,580 outpatient centers in the United States (plus 253 locations in 10 other countries), DaVita serves over 200,000 patients. Total revenue was $10.9 Billion, $663 Million net-income, and $4.7 billion in total equity. 

Tractor Supply Co (no public debt) is a top retail chain with over 1,200 stores across 47 states. The stores are strategically in more rural communities outside of major cities. Tractor Supply Co carries products for home improvement, agriculture, truck maintenance, livestock, equine care, and household pet care.

Key Positives

  • The all-cash offering eliminates foreclosure risk.

  • The lease term has a lengthy weighted average that extends beyond the 10-year hold period.

  • Favorable lease terms: (NNN), contracted rent increases, and lease extension options.

  • The population in the 5-mile radius is in six-figure (and growing).

  • Both DaVita locations are in Georgia, which is a Certificate of Needs State.

Key Risks to Consider

  • Neither DaVita or Tractor Supply CO. are rated investment grade, but they’re both strong companies that seem capable of covering the lease obligations.

  • The property values may diminish as the remaining lease terms decrease.

  • The offering lacks a master tenant, limiting the investor’s options should a tenant default.

  • Low CAP rate: 5.05%.

  • The tenants can legally make a "first refusal", which can hold up a potential sale.

Investment Sponsor Information

AEI

According to the sponsor's website: "Founded in 1970, AEI brings more than 40 years of professional expertise to the management of its net lease property investment funds. AEI Funds are created for investors seeking the opportunity for stable income, low volatility, reduced risk, and capital appreciation.

For investors who wish to own entire properties, AEI offers a large portfolio of attractive net leased, income-producing, real estate from which to choose. Net leased properties are especially suitable for tax advantaged 1031 exchanges. AEI began offering tenant-in-common (TIC) interests for IRS 1031 tax-deferred exchanges in 1992 and was the first investment firm in America to obtain a favorable IRS private letter ruling with respect to its TIC offerings."

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