ExchangeRight, the nation’s second largest sponsor of securitized 1031 exchange offerings, has brought two net-leased portfolios full cycle. The offerings were invested in necessity retail net-leased properties that have been acquired as part of ExchangeRight’s aggregated portfolio exit strategy.
ExchangeRight’s exit strategy 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 the three options.
Net-Leased Portfolio 1 is comprised of an 8,320-square-foot property located in Colorado and leased to Family Dollar. The property was purchased in May 2012 for $1.45 million and sold in late August 2019 for $1.51 million.
Net-Leased Portfolio 2 is comprised of seven properties totaling more than 62,000 square feet and located across Colorado, Texas, Tennessee, Illinois, Oklahoma, and Ohio. Four properties are leased to Family Dollar and three are leased to Dollar General.
Net-Leased Portfolio 2 had an acquisition cost of $9.86 million and the properties were purchased between July and August 2012. The portfolio was sold in late September for $11.47 million.
Taking into account returns to investors from operating cash flows, the total return for the two programs, including initial investment, were 145 percent and 164 percent for investors selecting the 1031 or cash out options.
For 721 investors, ExchangeRight noted that the return was equivalent to approximately 151 percent and 176 percent, based on an independent valuation of the combined portfolio performed by KPMG.
ExchangeRight said that the portfolios’ average annual rate of return was 9.24 percent, which is 26 percent higher than its initial projections. For 721 exchange investors who received operating units in the aggregated portfolio, the average annual returns were 10.90 percent, given the net asset value of the combined portfolio based on KPMG’s valuation.
“We are proud to have faithfully stewarded our clients’ capital over these last seven years, while providing higher total returns than we originally projected,” said Warren Thomas, managing member of ExchangeRight. “We are also excited that, in addition to serving investors who have reinvested into our 1031 offerings, we continue to offer value to investors who completed a tax-deferred 721 exchange by providing them with greater diversification through the aggregation of similar recession-resilient assets valued by KPMG over 10 percent higher than the basis that they rolled into the combined portfolio.”
ExchangeRight is a privately held firm based in Pasadena, California, and together with its affiliates, has more than $2.1 billion in assets under management.