Analysis of Investments

Net Lease 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.

Investment Highlights

  • Yr. 1 Cash-on-Cash 5.17%
  • Initial Occupancy 100.00%
  • Est. Time Horizon 10 years YEARS
  • Current Cash Flow 5.14%
  • Yr. 1 Cap Rate to Investor 5.16%
  • Investor Purchase Price $24,416,000
  • Total Offering Size $24,416,000

Loan Information


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

Tenant Information & Lease Terms

There are a total of three properties in this portfolio and each has a different tenant. The tenants are discussed below:

Fresenius Medical Care - Investment grade rating of BBB- from Standard and Poor's. Fresenius employs approximately 60,000 people and cares for over 170,000 patients.

BioLife Plasma Services - Investment grade rating of BBB from Standard and Poor's and Baa2 from Moody's. Their parent company, Baxalta, has over 16,000 employees and had over $6 Billion in revenue in 2014.

Hobby Lobby - Non-Investment grade tenant however they generate over $3.5 Billion in annual revenue and employ over 28,000 individuals.

Each of the leases has the option to extend for an additional 15 years, in increments of 5 years each. Rent escalations are schedule in each lease.

Key Positives

  • 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.

Key Risks to Consider

  • 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.

Investment Sponsor Information


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."