ExchangeRight Fully Subscribes $18.7 Million Value-Add Portfolio
ExchangeRight, a provider of Delaware statutory trust and non-traded real estate investment trust investment offerings, has fully subscribed its $18.7 million Value-Add Portfolio 3 DST – the third offering launched from its value-add platform. The offering has been structured to provide investors with monthly distributions currently at an annualized rate of 5.25% from in-place revenue.
ExchangeRight says its value-creation strategy focuses on proactively increasing occupancy across the portfolio’s shopping centers and securing favorable renewals with existing tenants. Positive variances in total income and the company’s ability to mitigate operating expenses has led to actual net operating income that surpassed projections by 12.2% through the first 10 months of the DST’s first fiscal year, according to Joshua Ungerecht, a managing partner at ExchangeRight.
Value-Add Portfolio 3 DST includes in-line and outparcel retail tenants shadow-anchored by long-term net-leased grocery and national retail companies. The portfolio features properties that exhibit in-place cash flow with the potential to preserve capital, pay current income, and provide long-term upside via strategic leasing initiatives and tenant improvements.
The DST consists of more than 43 unique tenants occupying eight in-line shopping centers diversified across seven states. The centers collectively span nearly 96,000 square feet and are shadow-anchored by what ExchangeRight describes as “historically recession-resilient companies,” including UnityPoint Health, ShopRite, Giant Eagle, and Food Lion.
According to an independent due diligence report from FactRight, Value-Add Portfolio 3 DST’s assets were acquired “for an atypically significant discount to recently appraised values.” The portfolio’s total third-party appraised value of just over $23 million is 23% greater than the investor purchase price, which includes over $3 million of fully accountable capital and operating reserves held on behalf of investors.
Warren Thomas, a managing partner at ExchangeRight, explained that despite its value-add approach, the offering is based on the same conservative underwriting and goals of capital preservation and stable income exhibited by ExchangeRight’s net lease platform.
“We apply the same in-depth due diligence, strategic diversification, and investor-centric approach to the construction of our value-add portfolios as we do for our net-leased DST and REIT offerings,” Thomas said. “So far, our Asset Management and Leasing Initiatives teams have driven favorable performance for [Value-Add Portfolio 3], and we remain committed to diligently prospecting for potential tenants to fill the vacancies that helped us acquire these assets at such an advantageous discount.”
ExchangeRight reports that the company and its affiliates’ platform has more than $5.9 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 May 31, 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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