ExchangeRight, a sponsor of securitized 1031-exchangeable real estate investments, has taken Net-Leased Portfolio 12 DST full cycle on behalf of its investors. The Delaware statutory offering invested in net-leased, necessity retail properties leased to Kroger, Dollar General, and Fresenius Medical Care.
ExchangeRight provided each DST investor with the option to perform another 1031 exchange, receive cash, or complete a tax-deferred 721 exchange into the acquiring portfolio, or any combination of these options.
Net-Leased Portfolio 12 comprised 19 single-tenant properties totaling approximately 263,600 square feet across eight states. The portfolio’s acquisition cost, including reserves, was $46.4 million when the properties were purchased between January 2016 and May 2016. The portfolio sold in December for $53.8 million.
ExchangeRight noted that, taking into account returns from operating cash flows and the initial investment, the program’s total returns were more than 125 percent for investors selecting the 1031 or cash out options. The portfolio’s average annual rate of return for cash and 1031 exchange investors was 7.01 percent, which the company said is 14.06 percent higher than its initial projections.
For 721 investors, the return was equivalent to more than 135 percent, based on an independent valuation of the portfolio performed by KPMG, the company said. For 721 investors who received operating units in the portfolio, the average annual returns were equivalent to 9.92 percent, or 61.30 percent higher than initial projections, given KPMG’s valuation.
“Bringing Net-Leased Portfolio 12 full cycle continued the successful execution of ExchangeRight’s aggregated exit strategy,” said Warren Thomas, a managing member of ExchangeRight. “By aggregating this offering’s net-leased assets together with those from the three other 1031 programs we brought full cycle this past year, we have maximized value and options for investors who have trusted us with their wealth and have created new value for 721-exchange investors who continue to invest with us.”
Based in Pasadena, California, ExchangeRight is a privately held firm and the nation’s second largest sponsor of securitized 1031 exchanges. Together with its affiliates, it has more than $2.4 billion in assets under management. ExchangeRight sponsors both real estate investment trusts and 1031 exchange investment offerings and acquires and manages long-term, net-leased assets backed by corporations in the necessity-based retail and healthcare industries.