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Wells Fargo Provides ExchangeRight REIT Credit Line Up to $400 Million

ExchangeRight’s Essential Income REIT has entered into a credit facility with Wells Fargo, closing on the first $75 million of the revolving line of credit with a maturity date of May 30, 2027. The credit facility may be increased to $400 million upon request of the Essential Income REIT, subject to receipt of commitments for the increased amount.

According to ExchangeRight, a provider of Delaware statutory trust and non-traded real estate investment trust investment offerings, the credit facility will optimize the REIT’s balance sheet and advance the company’s aggregation strategy by enhancing financing capacity, flexibility, and operational resilience.

Under the credit agreement, the borrower – ExchangeRight Income Fund Operating Partnership, LP, and ExchangeRight Income Fund, doing business as ExchangeRight Essential Income REIT – has the option to select loans as either a (i) base rate loan, (ii) term secured overnight financing rate loan (with a one-, three- or six-month tenor), or (iii) daily simple SOFR loan (as in effect from time to time), each of which is subject to an applicable margin that varies based on a ratio of the total indebtedness of the REIT, the borrower and the borrower’s subsidiaries, on a consolidated basis, to the consolidated group’s total asset value. The initial applicable margin for base rate loans is 1%, and the initial applicable margin for SOFR loans is 2%. The applicable margins will be adjusted quarterly following receipt of the REIT’s quarterly financial statements. The borrower has initially drawn $44 million under the agreement using a one-month term SOFR loan.

Interest on base rate loans and daily simple SOFR loans shall be payable monthly in arrears on the first day of each month. Interest on term SOFR loans will be payable at the end of each interest period, and in the case of interest periods longer than three months, quarterly. The borrower is also required to pay an unused commitment fee on the difference between committed amounts under the revolving credit facility and the amounts actually used under the revolving credit facility, which is 0.25% per annum when usage of the revolving credit facility is greater than or equal to 50%; and 0.15% per annum when usage of the revolving credit facility is less than 50%.

“This is the next step in the growth of the Essential Income REIT and ExchangeRight’s aggregation strategy,” said Joshua Ungerecht, a managing partner at ExchangeRight. “With this new credit facility, the REIT will be in an advantageous position to streamline operations and minimize transaction costs, create new opportunities to further diversify debt terms, and lock in long-term financing when rates are favorable.”

The REIT, which became a public reporting company one year ago, may utilize the credit facility to finance permitted acquisitions, certain capital expenditures and investments, payments of applicable pre-development and development costs, as well as to support any of its refinancing and working capital needs.

ExchangeRight’s Essential Income REIT, a Maryland statutory trust launched in 2019, is a self-administered real estate company focused on investing in single-tenant, primarily investment-grade net-leased real estate. The REIT currently pays an annualized distribution rate on new investments of 6.41% for its Class I shares and 6.02% for Class A shares and has fully covered its dividend with adjusted funds from operations since its inception and through its most recently reported period.

As of May 31, 2024, the REIT has aggregated a portfolio of 353 net-leased properties diversified across 34 states and 36 primarily investment-grade and historically recession-resilient tenants successfully operating in the necessity retail and healthcare industries.

Ungerecht said the agreement is expected to help optimize the REIT’s business operations to provide further protection and value-creation for investors.

“On behalf of the REIT’s investors, we are grateful for the relationship with Wells Fargo and for their thoughtful due diligence on the quality of the Essential Income REIT’s current portfolio and ExchangeRight’s investment and aggregation strategy,” said Ungerecht. “We remain committed to steward the trust placed in us by investors, advisers, representatives, and now, Wells Fargo with their provision of this valuable credit facility.”

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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