Exchanging hands
Net lease DST and private REIT sponsor ExchangeRight announced the completion of its 34th full-cycle event via the sale of its Net Leased Portfolio 28 DST (NLP-28) to its own sponsored private REIT, the ExchangeRight Essential Income REIT (ER-REIT)1. Price was not disclosed.

NLP-28 owned 23 properties, totaling 482,000 square feet across nine states, occupied by eight tenants (14 properties tenanted by Walgreens or Dollar General):

According to the company, the deal “provided investors multiple exit options at their sole discretion, with total net annual returns to investors ranging from 6.96% to 9.02%…investors were able to elect to complete a tax-deferred 721 exchange into [ER-REIT], perform another 1031 exchange, receive cash on a non-tax-deferred basis, or any combination of these options.

ER-REIT currently features a $1.2 billion portfolio of real estate diversified across 353 properties, 266 markets, and 37 primarily investment-grade rated tenants. Using one entity (ER-REIT) to acquire another (NLP-28) under the same family of sponsorship may remind some grizzly industry veterans of the go-go 2010s with groups like American Realty Capital Properties and WP Carey acquiring their affiliate private funds.

Given over half of NLP-28’s net operating income is likely sourced from flat or low-escalation leases tenanted by Walgreens and dollar stores, the reported 7-9% net (after fees) annual total return is impressively high (at least to the layman at the Observer…) given fund vintage, cap rate expansion, and the current market for those assets.

For a deeper dive on ExchangeRight’s $6 billion net lease platform, see Issue 13 of the Net Lease Observer releasing Tuesday, 12/10/2024!

Net lease giving thanks
Net lease REIT performed well during the month of November with the median REIT shares trading 2.7% higher while the Fundamental Income Net Lease Real Estate ETF gained 1.1%. Shares for 16 of the 25 tracked net lease REIT trade above prices at 2023 year-end despite noise around inflation, interest rates, the election, and the plethora of other geopolitical concerns. 2

-Sean Hostert