Analysis of Investments

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).

Investment Highlights

  • Yr. 1 Cash-on-Cash 6.13%
  • Initial Occupancy 100.00%
  • Est. Time Horizon None YEARS
  • Current Cash Flow 6.13%
  • Yr. 1 Cap Rate to Investor 5.61%
  • Investor Purchase Price $99,035,000
  • Total Offering Size $44,870,000

Loan Information

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-Offering 54.69%
  • Hold Period DSCR 2.22

Tenant Information & Lease Terms

All of the tenants are rated investment grade except for Tractor Supply Co, who does not trade debt. Half of the building are triple net (NNN) leased and the other half are double net (NN) leased. 

Walgreens (rated BBB by S&P), is the biggest retail health care supply provider in America. Walgreen's 8,600+ stores are spread across all 50 States, Washington DC, Puerto Rico, and Guam. Their stores offers over the counter and prescription medicine, consumer products, photo services, and pharmacy services. 

CVS (rated BBB- by S&P) is one of the largest health care retails operating more than 7,000 drug stores and pharmacies in the United States. 

Dollar General (rated BBB by S&P) is a large national small-box discount retailer. The corporation operates across 44 states with over 14,500 stores. They offer a wide range of consumable products at discount prices. 

Family Dollar Stores (Rated BBB by S&P) is ranks second largest small-box retailer in the United States. With more than 7,900 location that spans 45 states. Family Dollar has experienced exponential growth over the past decade as more of the population search for discounts on everyday products. 

Advanced Auto Parts (rated BBB- by S&P) is an auto part retailer that also has mechanic services. With almost 4,000 locations across the country, the retailer has superior availability of aftermarket parts and is a leader in auto service. 

Tractor Supply Co 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 agriculture, home improvement, truck maintenance, equine care, livestock care, and household pet care. 

Sherwin Williams (rated Baa3 by Moody's) is a Fortune 500 company that operates in the United States and Europe. The company manufactures, distributes, and sells building materials to professional and retail customers. It is the largest coatings manufacturer in the U.S. and the third largest in the world. 

Fresenius Medical Care (rated Baa3 by Moody's) operates over 2,000 dialysis centers across the country. Their services provide necessary care for patients with chronic kidney failure. 

Pick 'n Save, a subsidiary of Kroger (rated BBB by S&P), is the leading supermarket chain in the state of Wisconsin, where it operates more than 100 stores. 

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. 

Key Positives

  • 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.

Key Risks to Consider

  • 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.

Investment Sponsor Information


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."