Home Alts News ExchangeRight REIT Completes 506(c) Conversion

ExchangeRight REIT Completes 506(c) Conversion

ExchangeRight, a sponsor of diversified real estate DST and REIT investments, announced that ExchangeRight Essential Income REIT has converted to a 506(c) offering as of July 6, 2023,

As The DI Wire recently reported, the REIT transitioned to a publicly reporting company as of June 26, 2023. ExchangeRight says this was “to better serve the registered representatives, broker-dealers, advisors and institutions with whom the REIT works to offer its shares.”

The company says ExchangeRight Essential Income REIT has maintained monthly distributions that have been covered by funds generated by operations from its portfolio of long-term, net-leased properties. ExchangeRight says that 94.19% of the portfolio’s annualized base rent is generated from essential businesses.

The REIT’s portfolio is comprised of 943 properties in 627 markets across 43 states. The portfolio totals 16 million square feet and includes 55 tenants across 16 industries, including Walgreens, Dollar General, Tractor Supply, Kroger, CVS, Hobby Lobby, Fresenius Medical Care, BioLife, Family Dollar, and Walmart Neighborhood Market.

According to the company, ExchangeRight Essential Income REIT pays a 5.89% current annualized distribution rate for Class A shares and a 6.27% current annualized distribution rate for Class I shares, which equate to a 9.46% and 10.05% tax-equivalent yields, respectivelybased on a 37% federal tax bracket, 8% state tax bracket, and a 3.8% Medicare surtax.

Additionally, ExchangeRight reports that the REIT has maintained 100% rent collection since inception through June 30, 2023, inclusive of lockdown months through the COVID crisis, the inflation that followed, and the more recent economic turbulence that has preceded a rising risk of recession.

Distributions have reportedly been fully covered by operations, with a 109.44% AFFO to distribution coverage ratio from inception through March 31, 2023.

“The Essential Income REIT is the most broadly diversified expression of ExchangeRight’s investment strategy, which grew out of the aftermath of the 2008–2010 recession and is vitally focused on protecting the wealth that investors entrust to our stewardship,” said Warren Thomas, a managing partner at ExchangeRight. “Our strategy focuses on assets, tenants, and industries that have historically provided stable performance regardless of market conditions. We target properties located in growing markets with net leases to insulate investors from rising costs and surprise repairs. Long lease terms primarily with investment-grade credit and national tenants successfully operating in historically recession-resilient sectors are intended to bridge economic cycles and provide investors with consistent income.”

ExchangeRight and its affiliates’ platform has more than $5.6 billion in assets under management that are diversified across more than 1,200 properties and over 22 million square feet throughout 47 states. 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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