ExchangeRight Essential Income REIT Reports 0.44% NAV Increase Quarter-Over-Quarter
ExchangeRight, a Pasadena, Calif.-based sponsor of Delaware statutory trust and non-traded real estate investment trust investment offerings, announced that its Essential Income REIT net asset value has increased again to $27.26 per share as of June 30, 2024, based on an independent real estate valuation of the REIT’s real estate by KPMG combined with its other assets and liabilities. This was a 0.44% increase from the end of the previous quarter, March 31: $27.14.
Also in June, the REIT entered into a credit facility with Wells Fargo, closing on the first $75 million of the revolving line of credit with a maturity date of May 30, 2027. It closed on the next $25 million in late July. The credit facility may be increased to $400 million upon request of the Essential Income REIT, subject to receipt of commitments for the increased amount. It listed potential uses to: finance permitted acquisitions, expenditures, and investments; pay applicable pre-development and development costs; and support refinancing and working capital needs.
As of June 30, the Essential Income REIT’s portfolio included 353 properties net leased to 36 primarily investment-grade tenants successfully operating in the necessity-based retail and healthcare industries and diversified across 34 states. According to the company, this aligns with its aggregation strategy and provided added value for investors.
The Essential Income REIT’s monthly distributions to investors have remained stable and consistent since its 2019 launch and throughout unprecedented economic volatility. The REIT’s adjusted funds from operations continue to fully cover its current annualized net distribution of 6.38% for Class I shares and 6.00% for Class A shares. The REIT’s AFFO-to-distribution coverage is 105.95% since inception through March 31, 2024, its most recently reported period. According to ExchangeRight, this healthy distribution coverage helps to ensure that investors are paid exclusively from its operations and not from financing, forced sales, or investors’ capital.
Joshua Ungerecht, a managing partner at ExchangeRight, said that the additional NAV increase is a result of the REIT’s investor-centric design, structured to provide stable cash flow and preservation of capital, even during times of economic and market volatility.
“We are excited to achieve this consecutive increase in the REIT’s net asset value on behalf of the Essential Income REIT’s investors, especially in an economic environment that has been so incredibly volatile,” said Ungerecht. “This favorable valuation is further evidence of the strength and economic resilience of our REIT, which we credit largely to the enhanced diversification and risk mitigation created by aggregating together high-quality assets with historically recession-resilient tenants that successfully operate in necessity-based industries.”
In June 2024, The DI Wire reported that the Essential Income REIT had launched a new share class – ER shares, exclusively for broker-dealer representatives and their accredited investor clients and targeting a 10% internal rate of return net to investors.
ExchangeRight said the shares’ internal rate of return is supported by a current monthly tax-efficient income of 6% annualized and additional growth potential generated by participation in the REIT’s value in addition to ExchangeRight’s incentive fees and sponsor DST fees.
According to the sponsor company, the Class ER shares’ baseline 6% annual return target is anchored by the performance of the Essential Income REIT’s real estate portfolio, more than $1.2 billion as of June 30, 2024. The REIT has fully covered its dividend since its January 2019 inception and has collected 100% of rents regardless of economic volatility. The REIT became a public reporting company one year ago.
ExchangeRight reports that the company and its affiliates’ platform has more than $6 billion in assets under management that are diversified across more than 1,200 properties and over 24 million square feet across 47 states, as of June 30, 2024. The company invests in net-leased properties in the “necessity-based” retail and healthcare industries, as well as value-add inline and outparcel retail spaces shadow-anchored by grocery tenants.
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