ExchangeRight, a private real estate firm and sponsor of securitized 1031 exchange offerings, has taken another Delaware statutory trust offering full cycle on behalf of investors.
The offering, Net-Leased Portfolio 8 DST, was comprised of 13 net-leased, necessity retail properties located in seven states that totaled 151,300 square feet. The properties were purchased between October 2014 and February 2015 for $35.9 million and sold in October 2019 for $41.6 million.
The properties were purchased as part of ExchangeRight’s aggregated portfolio exit strategy, which gives each DST investor 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.
“Our aggregated exit strategy has made this full-cycle event a true win-win for both ExchangeRight’s DST investors and for 721 exchange investors who continue to invest with us in our aggregated portfolio,” said Joshua Ungerecht, managing member of ExchangeRight. “By executing on our strategic exit for Net-Leased Portfolio 8, we were able to provide higher total returns than we originally projected for 1031 investors while creating value for 721 exchange investors through a highly diversified aggregated portfolio of properties leased to recession-resilient corporations.”
Taking into account the returns to investors from operating cash flows and including initial investment, ExchangeRight noted that total returns for the offering were more than 136 percent for investors selecting the 1031 or cash out options. For 721 investors, the return was more than 146 percent, based on an independent valuation of the portfolio performed by KPMG.
ExchangeRight said that the portfolio’s 7.69 percent average annual rate of return for cash and 1031 exchange investors was higher than its initial projections. For 721 exchange investors who received operating units in the aggregated portfolio, the average annual return was 9.99 percent, which was 35.91 percent higher than the initial projections, given the net asset value of the combined portfolio based on KPMG’s valuation.
ExchangeRight is based in Pasadena, California, and together with its affiliates, has more than $2.3 billion in assets under management.