Experienced real estate company that reports having over $1.7 billion of assets under management across over 500 properties.
The portfolio is 100% leased across 8 different tenants and 19 different properties.
Portfolio is geographically diverse and includes a diversified mix of tenants including CVS Pharmacy, Walgreens, Dollar General, Autozone and more.
ExchangeRight Real Estate LLC
ExchangeRight is committed to providing 1031-exchangeable DST offerings of value-added multifamily properties and net-leased portfolios. Our multifamily platform targets Class B apartments with stable income and value added upside potential. Our multifamily offerings feature strong cash flow, high debt coverage ratios, conservative underwriting, long-term fixed-rate financing, and the potential to enhance return with value-added strategies.
In addition to intentionally structuring offerings with an alignment of interest with investors, the principals of the company have taken a personal investment position in each DST offering that has been brought to market. Each of our DST offerings provides both 1031 and cash investors with pass-through tax deferral advantages.http://www.exchangeright.com/
Warren currently serves as a managing member for ExchangeRight Real Estate. He is focused on the securitization, broker dealer, and registered representative relations sides of the business. Warren is the co-founder and president over a number of integrated wealth management and securitized real estate companies with Joshua Ungerecht. Prior to focusing on the securitized 1031 exchange market in 2003, Warren developed an extensive tax practice including estate planning, financial planning, and real estate advisory services. Warren has over 30 years of experience as a CPA and has been an active commercial real estate investor for the past 15 years. He graduated in 1978 from Biola University with a B.S. in Business Administration, specializing in Accounting. He also earned a master's degree in Taxation from Golden Gate University in 1993. He maintains Series 6, 7, 22, 24, 39,63, and 79 Securities Licenses.
David Fisher enjoyed a successful career in banking and finance for 20 years. He is now focused on the management success of ExchangeRight and on managing his own investments. He began his career with KPMG in the tax department, and then worked in tax, treasury, and acquisitions for Wells Fargo for over nine years. He was North American Head of Asset and Structured Finance for HSBC's Investment Banking division for the last seven years of his banking career. David and his banking teams executed international financings in excess of $4 billion. He has been an active real estate investor for the past 10 years and has interests in over 30 partnerships across nine states. He graduated from the University of Northern Iowa in 1993, Magna Cum Laude in Accounting, and earned national honors with the Elijah Watt Sells Award on the May 1993 CPA exam.
Joshua currently serves as a managing member for ExchangeRight Real Estate. He is focused on the operations, investment structuring, and acquisitions aspects of the business. Concurrently, he serves as CEO and Chief Investment Officer over a number of integrated wealth management and securitized real estate companies. He developed one of the industry's leading due diligence platforms in securitized real estate analysis. Together with Warren Thomas, Joshua has overseen the acquisition of over $500 million in real estate since 2003. Joshua graduated from The Master's College, Summa Cum Laude with a B.A. in Theology, Apologetics, and Missions, and is currently on leave from Talbot Graduate School, where he was pursuing an M.A. in Philosophy of Religion and Ethics. He also maintains Series 7, 22, 24, 63, 65, and 79 Securities Licenses and an active California real estate license.
Dave currently serves as Chief Financial Officer for ExchangeRight Real Estate. He is focused on financial reporting and acquisitions for the Company. Dave began his career with KPMG in the financial services audit practice, and most recently was with Kaufman Jacobs Real Estate Investments were he was involved in the investment acquisition, capital markets, and financial reporting aspects of the business. Dave graduated from Trinity Christian College with highest honors with a B.S. in Accounting and a Finance concentration. Dave is a CPA and is also a CFA Level III candidate.
|Offering||Description||Targeted Annualized Return||Actual Annualized Return*|
|Net-Leased Preferred Equity Fund 1||Shorter-term fund to acquire and sell net-leased assets for the Sponsor.||Range of 12-20%**||Average
|Net-Leased Perferred Equity Fund 2||Shorter-term fund to acquire and sell net-leased assets for the Sponsor. Proforming as expected.||Range of 8-12%**||10%|
|Acquisition Notes||Company that issues short term debt capital to the Sponsor to acquire and sell net-leased assets. Performing as expected.||Range of 12-14%**||12%|
|Offering||Description||Targeted Annualized Return||Actual Annualized Return*|
|Net-Leased Preferred Equity Fund 4||Shorter-term Fund to acquire and sell net-leased assets for the Sponsor. Performing as expected.||7.00%||7.00%|
|Net-Leased Preferred Equity Fund 3||Shorter-term Fund to acquire and sell net-leased assets for the Sponsor. Performing as expected.||8.25%||8.25%|
|Acquisitions Notes II||Company that issues short term debt capital to the Sponsor to acquire and sell net-leased assets. Performing as expected.||Range of 8-
|Acquisition Notes 3||Company that issues short term debt capital to the Sponsor to acquire and sell assets. Performing as expected.||8.25%||8.25%|
|Net-Leased Portfolio 1||Portfolio of two long-term net-leased properties leased to Family Dollar. One of the two properties sold in January, 2015 at a 10.59% annualized net profit to investors. Current remaining property return shown in chart and is exceeding expectations.||7.25%||7.25%|
|Net-Leased Portfolio 2||Portfolio of seven long-term net-leased properties leased to Family Dollar (6) and Dollar General (1). Performing as expected.||7.45%||7.45%|
|Net-Leased Portfolio 3||Portfolio of nine long-term net-leased properties leased to Family Dollar (8) and Dollar General (1). Performing as expected.||7.47%||7.47%|
|Net-Leased Portfolio 4||Portfolio of eleven long-term net-leased properties leased to Family Dollar (8), Dollar General (1), Aaron's (1) and Advance Auto Parts (1). Performing as expected.||7.00%||7.00%|
|Net-Leased Portfolio 5||Portfolio of fourteen long-term net-leased properties leased to Family Dollar (5), Dollar General (4), Advance Auto Parts (2), AutoZone (1), Sherwin Williams (1) and The Christ Hospital (1). Performing as expected.||7.54%||7.54%|
|Net-Leased Portfolio 6||Portfolio of sixteen long-term net-leased properties leased to Family Dollar (3), Dollar General (8), Advance Auto Parts (1), AutoZone (1), CVS (1), Dollar Tree (1) and Tractor Supply (1). Performing as expected.||7.61%||7.61%|
|Net-Leased Portfolio 7||Portfolio of sixteen long-term net-leased properties leased to Family Dollar (4), Dollar General (8), Advance Auto Parts (1), CVS (1), Napa Auto Parts (1), and O'Reilly Auto Parts (1). Performing as expected.||7.77%||7.77%|
|Net-Leased Portfolio 8||Portfolio of thirteen long-term net-leased properties leased to Advance Auto Parts (3), AutoZone (2), CVS (1), Dollar General (2), Family Dollar (1), Franciscan Alliance (1), Ross Stores (1) and Tractor Supply (2). Performing as expected.||7.35%||7.35%|
|Net-Leased Portfolio 9||Portfolio of twenty-two long-term net-leased properties leased to Advance Auto Parts (4), AutoZone (4), CVS (1), Dollar General (9), Hobby Lobby (1), Napa Auto Parts (2) and TCF National Bank (1). Performing as expected.||7.17%||7.17%|
|Net-Leased Portfolio 10||Portfolio of twenty-two long-term net-leased properties leased to Advance Auto Parts (3), AutoZone (1), CVS (1), Dollar General (5), Dollar Tree (1), Family Dollar (4), Napa Auto Parts (2), O'Reilly Auto Parts (2), PNC Bank (1) and Tractor Supply (2). Performing as expected.||7.09%||7.09%|
|Net-Leased Portfolio 11||Portfolio of seventeen long-term net-leased properties leased to Advance Auto Parts (3), CVS (1), Dollar General (5), Family Dollar (2), Hobby Lobby (1), Napa Auto Parts (3), Sherwin- Williams (1) and Walgreens (1).||6.77%||6.77%|
|Net-Leased Portfolio 12||Portfolio of nineteen long-term net-leased properties leased to Advance Auto Parts (3), Dollar General (9), Family Dollar (1), Fresenius Medical Care (1), Kroger (1), Napa Auto Parts (2), Tractor Supply (1), and Walgreens (1).||6.15%||6.30%|
|Net-Leased Portfolio 13||Portfolio of twenty long-term net-leased properties leased to Advance Auto Parts (1), CVS, (1), Dollar General (5), Family Dollar (4), Hobby Lobby (1), Napa Auto Parts (1), Sherwin Williams (4), Tractor Supply (1) and Walgreens (2).||6.64%||6.80%|
|Net-Leased Portfolio 14||Portfolio of seventeen long-term net-leased properties leased to Advance Auto Parts (1), Athletico Physical Therapy (1), Dollar General (6), Fresenius Medical Care (2), MedSpring (1), Napa Auto Parts (1), O’Reilly Auto Parts (1), Tractor Supply (1) and Walgreens (3).||6.53%||6.60%|
|Net-Leased Portfolio 15||Portfolio of sixteen long-term net-leased properties leased to Advance Auto Parts (2), CVS (1), Dollar General (6), Family Dollar (1), Fresenius Medical Care (1), Goodwill (1), Hobby Lobby (1), Indianapolis Osteopathic Hospital (1) and Walgreens (2).||6.52%||6.52%|
|Net-Leased Portfolio 16||Portfolio of nineteen long-term net-leased properties leased to Advance Auto Parts (3), Dollar General (7), Family Dollar (1), Hobby Lobby (1), Sherwin Williams (1), Tractor Supply (2) and Walgreens (4).||6.78%||6.78%|
|Net-Leased Portfolio 17||Portfolio of sixteen long-term net-leased properties leased to Advance Auto Parts (1), Dollar General (7), Goodwill (1), Pick ‘n Save (Kroger Guarantee) (1), Napa Auto Parts (1), Tractor Supply (2), Verizon Wireless (1) and Walgreens (2) .||6.84%||6.84%|
|Net-Leased Portfolio 18||Portfolio of seventeen long-term net-leased properties leased to Advance Auto Parts (1), CVS (1), Dollar General (6), Fresenius Medical Care (1), Hobby Lobby (1), Napa Auto Parts (1), Tractor Supply (2) and Walgreens (4).||6.64%||6.64%|
|Net-Leased Portfolio 19||Portfolio of twenty one long-term net-leased properties leased to Advance Auto Parts (2), Dollar General (9), Fresenius Medical Care (1), Hobby Lobby (1), Napa Auto Parts (2), Verizon Wireless (1) and Walgreens (3).||6.73%||6.73%|
|Net-Leased Portfolio 20||Portfolio of sixteen long-term net-leased properties leased to Advanced Auto Parts (3), Dollar General (4), Fresenius Medical Care (1), BioLife Plasma Services LP (1), NAPA Auto Parts (1), Pick n Save (1), Tractor Supply (2), Verizon Wireless (1) and Walgreens (2).||6.50%||6.50%|
|Net-Leased Portfolio 21||Portfolio of twenty long-term net-leased properties leased to Advanced Auto Parts (1), Dollar General (6), Frensenius Medical Care (3), Hobby Lobby (1), Nappa Auto Parts (2), O'Reilly Auto Parts (1), Tractor Supply (3) and Walgreens (3).||6.38%||6.42%|
|Net-Leased Portfolio 22||Portfolio of fifteen long-term net-leased properties leased to BioLife Plasma Services (1), CVS (1), Dollar General (4), Family Dollar (1), First Midwest Bank (1), Fresenius Medical Care (1), Pick ‘n Save (1), Tractor Supply (2) and Walgreens (3).||6.25%||6.25%|
|Net-Leased Portfolio 23||Portfolio of twenty four long-term net-leased properties leased to Advance Auto Parts (2), AutoZone (2), Dollar General (8), Family Dollar (2), GIANT Food Store (1), Tractor Supply (2), and Walgreens (7).||6.19%||6.30%|
|Net-Leased Portfolio 24||Portfolio of 24 long-term net-leased properties leased to Advance Auto Parts (2), BioLife Plasma Services (2), CVS (1), Dollar General (5), Dollar Tree (1), Fresenius Medical Care (1), Pick ‘n Save (1), Sherwin Williams (1), Tractor Supply (3) and Walgreens (7).||6.13%||6.13%|
|Net-Leased Portfolio 25||Portfolio of 21 long-term net-leased properties leased to BioLife Plasma Services (2), Dollar General (8), Family Dollar (2), Hobby Lobby (1), Hy-Vee (1), Tractor Supply (3), and Walgreens (4).||6.10%||6.15%|
|Multifamily 1 - Van Mark Creek Apartments||One (1) apartment community consisting of 144 units. Performing as expected.||7.31%||7.31%|
|Multifamily 2 - Mira Bella and San Martin||One (1) apartment community consisting of 378 units. Performing as expected.||6.81%||6.81%|
|Multifamily 3 - Lakeside at Arbor Place Apartments||One (1) apartment community consisting of 246 units. Performing as expected.||6.86%||6.86%|
|Multifamily 4 - North Austin Apartment Portfolio||Three (3) apartment communities consisting of 422 units. Performing as expected.||6.61%||6.61%|
|Multifamily 5 - Crystal Lake Florida Apartments||One (1) apartment community consisting of 224 units. Performing as expected.||6.47%||%.03|
|Multifamily 6 - El Paso Apartment Portfolio||Two (2) apartment communities consisting of 393 units. Performing as projected.||5.75%||5.83%|
On March 6, 2019 (the “Loan Closing Date”), the Sponsor acquired the Properties for an aggregate acquisition cost of $88,094,642 and then assigned all of the Properties to the Trust pursuant to the terms of the Trust Agreement. The Properties are now owned 100% by the Trust. In conjunction with the purchase of the Properties, ExchangeRight NLP 26 Master Lessee ("Master Lessee") became the lessor under the Tenants’ leases. The Trust is a passive owner of the Properties and is not to be involved in any manner in the active management of the Properties. The Manager has been appointed to manage the Trust pursuant to the Trust Agreement.
Investors are being offered the opportunity to invest in a portfolio of nineteen (19) single-tenant, long-term net-leased retail assets (the "Portfolio", or the "Properties") that are currently 100% occupied. The Portfolio is composed of a diversified tenant base:
- 33.7% Grocery (Hy-Vee, Pick 'n Save)
- 29.8% Pharmaceutical (Walgreens, CVS)
- 23.8% Agricultural (Tractor Supply)
- 8.5% Discount Necessity Retail (Dollar General)
- 4.2% Discount Auto (Autozone, Advanced Auto Parts)
ExchangeRight Net-Leased Portfolio 26 DST, a Delaware Statutory Trust ("DST"), owns the Portfolio, and ExchangeRight Real Estate, LLC ("Sponsor") is offering beneficial interests in the trust to investors. The Sponsor is retaining at least a 1.0% ownership interest in the Portfolio and is offering up to 99.0% of the beneficial interests in the DST to accredited investors ("Beneficial Owners"). The Trust expects to provide the Beneficial Owners a return on their investment in two primary ways: (i) in the form of monthly cash distributions to the Beneficial Owners; and (ii) upon any Disposition of the Properties.
The total offering amount is $99,950,000 of which $44,950,000 is equity and $55,000,000 is long-term fixed rate financing.
This offering is designed for two types of investors. "Existing 1031 Investors" who have already sold or are planning to sell an existing property that is 1031 eligible and want to invest in this offering to complete their 1031 exchange. As well as "Cash Investors" who are investing with funds that are not part of an existing 1031 exchange but want the option for future sales to be 1031 exchange eligible. Existing 1031 Investors may invest for a minimum of $100,000; Cash Investors may invest for a minimum of $25,000 at the Sponsor's discretion.
|Tenant||Location||Credit Rating||Size||Current NOI||Lease Type||Lease Expiration|
|Advance Auto Parts||Midlothian, VA||BBB-||11,762||$119,760||NN||12/31/2028|
|CVS Pharmacy||Fayetteville, GA||BBB||10,164||$204,275||NNN||4/30/2033|
|Dollar General||Alton, TX||BBB||9,220||$88,491||NNN||8/31/2029|
|Dollar General||Clarksville, TN||BBB||9,300||$83,890||NNN||4/30/2029|
|Dollar General||Cleveland, TN||BBB||9,026||$98,135||NNN||11/30/2033|
|Dollar General||Edinburg, TX||BBB||9,421||$91,725||NNN||5/31/2029|
|Dollar General||Uniontown, OH||BBB||9,454||$107,517||NNN||1/31/2034|
|Pick 'n Save (Kroger Guaranty)||Wausau, WI||BBB||68,000||$750,000||NN||2/28/2029|
|Tractor Supply||Conroe, TX||N/A||21,702||$455,205||NN||8/11/2033|
|Tractor Supply||Conyers, TX||N/A||18,741||$210,000||NN||9/30/2033|
|Tractor Supply||Odessa, TX||N/A||21,930||$321,585||NN||4/9/2031|
|Tractor Supply||Santa Fe, TX||N/A||21,692||$325,551||NN||6/30/2032|
*Credit Ratings are from S&P (Standard & Poor)
CVS Health (NYSE: CVS) is a health care retailer based in the United States. It operates over 7,000 pharmacy and drug stores, and was ranked 7th on the Fortune 500 list in 2018. CVS Health consists of four divisions, which include CVS/pharmacy, CVS/caremark, CVS/specialty, and CVS/ minuteclinic. CVS has achieved much of its growth through acquisition of other companies.
Pick ‘n Save was founded in 1975 in Milwaukee, Wisconsin and is now the premier supermarket chain in Wisconsin with over 100 stores serving customers. Featuring competitive employee benefits and a strong commitment to promote from within, Pick ‘n Save employs approximately 10,000 employees. In 2015, Pick ‘n Save became a wholly owned subsidiary of Kroger (NYSE: KR). The Kroger Co., together with its subsidiaries, operates as a retailer in the United States. It operates under the banner brands, such as Kroger, Ralphs, Fred Meyer, King Soopers, etc., as well as Simple Truth and Simple Truth Organic brands.
Dollar General (NYSE: DG) is one of the nation’s largest small-box discount retailers. Dollar General has over 121,000 employees operating over 13,300 locations in 43 states. It strives to make shopping for everyday needs simpler and hassle-free by offering a carefully selected assortment of the most popular brands at low everyday prices in small, convenient locations. Dollar General Corporation was founded in 1939 and is based in Goodlettsville, Tennessee.
Tractor Supply Co. (NASDAQ: TSCO) is a leading chain of retail stores that each carry products related to home improvement, agriculture, truck maintenance, livestock, equine care, and household pet care. It employs over 17,000 individuals and operates over 1,200 stores across 47 states.
Walgreens (NASDAQ: WBA) is the largest drug retailer in America—employing approximately 248,000 people and operating 8,678 stores throughout the United States. Walgreens’ products include over-the-counter medicine and consumer products, pharmacy services and photo services. Walgreens has expanded through a series of strategic acquisitions and was included in Fortune’s World’s Most Admired Companies list for the 20th consecutive year.
Hy-Vee, Inc. is an employee-owned corporation operating 247 retail food and drug stores throughout the Midwest. The company was founded in 1930 and has since expanded both in terms of stores and industries, including 146 Hy-Vee locations that operate fuel stations, and its subsidiary, Midwest Heritage Bank. Headquartered in West Des Moines, the company now employs over 85,000 workers and is #30 on Forbes private company list.
AutoZone, Inc. (NYSE: AZO) is the second-largest retailer of aftermarket automotive parts and accessories in the United States, behind Advance Auto Parts. AutoZone is a Fortune 500 company, and its stock is an S&P 500 Component. The company was founded in 1979 and has over 5,000 retail outlets throughout America, Puerto Rico, Mexico, and Brazil.
Advance Auto Parts (NYSE: AAP) is an aftermarket retailer of automotive parts and supplies and a provider of auto maintenance services. It operates nearly 4,000 stores and employs about 55,000 “Team Members.” Increases in new vehicle sales allow Advance Auto to demonstrate its key strategies: superior availability and service leadership. It continues to increase its delivery speed, reliability, and supply chain, and it is opening new stores in underserved markets.
**Tenant Summaries have been provided by Sponsor and have not been verified by Realty Mogul or North Capital Private Securities
Appraisals for all properties available upon request. Please email email@example.com.
The Portfolio contains properties located in the following cities and states:
- Midlothian, VA
- Merrillville, IN
- Fayetteville, GA
- Alton, TX
- Clarksville, TN
- Cleveland, TN
- Edingburg, TX
- Uniontown, OH
- Oakdale, MN
- Waudsau, WI
- Conroe, TX
- Conyers, TX
- Odessa, TX
- Chalmette, LA
- Cincinnati, OH
- Lafayette, IN
- McDonough, GA
- Milwaukee, WI
|Sources of Funds||Cost|
|Total Sources of Funds||$99,950,000|
|Uses of Funds||Cost|
|Acquisition Closing Costs||$4,700,276|
|Reallowance of Acquisition Fee||$449,500|
|Broker-Dealer Fee and Marketing Allowance||$3,596,000|
|Syndication Costs & Third Party Costs||$115,000|
|Organizational, Offering Costs, Pre-Paid Taxes, & Insurance||$208,304|
|Reserves (excluding Pre-paid Taxes & Insurance)||1,174,448|
|Total Uses of Funds||$99,950,000|
The Portfolio has existing debt:
- Lender: Societe Generale Finacial Corporation
- Loan Origination Date: 3/6/2019
- Loan Proceeds: $55,000,000
- Loan to Cost: 62.43%
- Interest Rate: Fixed (4.58%)
- Amortization: 10-year interest only
- Recourse: Non-recourse to the Trust, but recourse to the Trust and principals of the Sponsor for certain (i) "bad acts," and (ii) environmental indemnification
- Term: 10 years
The Sponsor is to make distributions directly to investors who own a beneficial interest in the DST on a pro-rata basis.
Distributions are expected to start for each investor within 45 days of the completion of that investors beneficial interest in the DST. Distributions are expected to continue on a monthly basis thereafter. These distributions are at the discretion of the Sponsor and made directly by the Sponsor, neither Realty Mogul Co. nor any of its affiliates have any control or discretion on the timing or amount of distributions.
Certain fees and compensation will be paid over the life of the transaction. The following fees and compensation will be paid:
|Type of Fee||Amount of Fee||Received By||Paid From||Notes|
|Acquisition Fee||$1,499,456||Sponsor||Capitalized Equity Contribution||3.34% of the offering amount.|
|Reallowance of Acquisition Fee||$449,500||Sponsor||Capitalized Equity Contribution||1% of the offering amount. Paid to Exchange Right Securities, an affiliate of Sponsor.|
|Broker-Dealer Fee||$2,921,750||Broker Dealers||Capitalized Equity Contribution||6.5% of the offering amount. Paid to North Capital(1) or other licensed broker-dealers based on the amount of equity capital raised. Additional 0.5% paid to Exchange Right Securities, an affiliate of Sponsor, of which up to half may be reallowed to broker-dealers. Surplus fees retained by Sponsor.|
|Marketing & Due Diligence Fee||$449,500||Broker Dealers||Capitalized Equity Contribution||1.0% based on the amount of equity invested by investors through RealtyMogul.com, third-party Broker Dealers (including North Capital(1))are entitled to additional fees based on equity they originate. Surplus fees retained by Sponsor.|
|Syndication Costs||$85,000||Sponsor or Third Parties||Capitalized Equity Contribution||Approximately 0.20% of the Maximum Offering Amount|
|Organizational & Offering Costs||$89,900||Sponsor||Capitalized Equity Contribution||0.2% of maximum offering amount.|
|Sponsorship Cost||$112,375||Sponsor||Capitalized Equity Contribution||Approximately 0.25% of the offering amount. To reimburse Sponsor for accounting, due diligence, marketing, distribution, and other costs.|
|Disposition Fee||2%||Manager||Disposition Proceeds||
2.0% of gross proceeds from disposition of property if disposition price is greater than $99,950,000.
|Type of Fee||Amount of Fee||Received By||Paid From||Notes|
Asset Management Fee
|.40% of gross rental income||Manager||Operating Cash Flow|
|Property Management Fee||2.5% of gross rental income||Manager||Operating Cash Flow||
|Trustee Fee||$750 annually||Third-Party||Operating Cash Flow||Unaffiliated third party|
|Master Lease Operating Profit||N/A||Master Lessee||Operating Cash Flow||Master Lessee will retain operating revenues from the Properties that exceed the annual base rent.|
(1) Certain employees of Realty Mogul, Co. are registered representatives of, and are paid commissions by, North Capital Private Securities Corp., a Delaware corporation ("North Capital"). In addition, North Capital pays a technology provider services fee to Realty Mogul, Co. for licensing and access to certain technology, reporting, communications, branding, entity formation and administrative services performed from time to time by Realty Mogul, Co., and North Capital and Realty Mogul, Co. are parties to a profit sharing arrangement.
The above presentation is based upon information supplied by the Sponsor or others. Realty Mogul, Co. along with its respective affiliates, officers, directors or representatives (the "RM Parties") hereby advise you that none of them has independently confirmed or verified any of the information contained herein. The RM Parties further make no representations as to the accuracy or completeness of any such information and undertake no obligation now or in the future to update or correct this presentation or any information contained herein.
Review of PPM
Before making any investment decision, potential investors should carefully review the Private Placement Memorandum prepared by Sponsor (the "PPM"), including but not limited to, the Risk Factor section of the PPM and all exhibits of the PPM. The PPM contains additional risk factors and information regarding the DST that are not contained herein.
DST's are ill equipped to address the untimely and unexpected need to raise capital or to re-tenant a property or to carry a property in the event of excessive vacancies. The Master Lessee is not likely to have the necessary resources to replace tenants as a result of default or untimely turnover. This risk is increased by an investment which includes multiple properties.
Although it is intended that interests will be acquired on a tax-deferred basis under Code Section 1031, each investor must satisfy a number of technical requirements to qualify for tax deferral under Section 1031. Also, no assurance can be given that investors will be able to complete a qualifying Section 1031 exchange in the future when the Portfolio is sold.
Real Estate Investment Risk
Any investment in real estate carries certain inherent risks, and there is no guaranty as to the future occupancy of the Properties or operating results. Factors which might influence outcome include:
- Changes in national or local economic conditions
- Changes in the local market, including the entry of new competitors
- Changes in the financial condition of the major tenant or tenants
- The occurrence of casualties or natural disasters
- The enactment of unfavorable laws
Master Lease Risk
The Properties are subject to a Master Lease to an affiliate of the Sponsor whose only assets and source of revenues will be the underlying Properties and which may not be able to meet its obligations as they come due. As with any Master Lease, if there is a significant upswing in rents, that upside accrues to the Master Lessee, but if there is falloff or vacancy, that risk is likely to fall on the investors. There is a substantial risk that, if the Master Lessee is unable to meet its obligation to pay rent, a default or foreclosure may occur under property financing which could result in a substantial or total loss of an investment.
Conflict of Interest Risk
There are various potential conflicts of interest among the Sponsor, the Trustees, the Signatory Trustees, the Master Lessee, the Property Managers, and others engagement in the management and operation of the Properties, one or more of whom may be affiliated with the others.
IRS established seven prohibitions over the powers of the DST Trustee, which include the following:
- Once the offering is closed, there can be no future equity contribution to the DST by either current or new co-investors or beneficiaries
- The DST Trustee cannot renegotiate the terms of the existing loans, nor can it borrow any new funds from any other lender or party
- The DST Trustee cannot reinvest the proceeds from the sale of its investment real estate
- The DST Trustee is limited to making capital expenditures with respect to the property to those for a) normal repair and maintenance, (b) minor non-structural capital improvements, and (c) those required by law
- Any liquid cash held in the DST between distribution dates can only be invested in short-term debt obligations
- All cash, other than necessary reserves, must be distributed to the co-investors or beneficiaries on a current basis, and
- The Trustee cannot enter into new leases or renegotiate the current leases
Some of these restrictions are ameliorated in part by the introduction of a Master Lessee, who will have the ability, for example, to enter into or renegotiate leases. However, the existence of a Master Lessee carries with in its own set of risk factors. In addition, DST Members will have no voting rights, and therefore no control over future decisions regarding sale of the properties or roll-up into a limited liability company.
ExchangeRight Net-Leased Portfolio 26, LLC (the "Signatory Trustee") has based these forward-looking statements on its current expectations and predictions about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about the Property, including, among other things, factors discussed below:
- General economic performance of the local and national economy;
- Required capital expenditures at the Property
- Competition from properties similar to and near the Property
- Adverse changes in local population trends, market conditions, neighborhood values, and local economic and social conditions
- Supply and demand for property such as the Property
- Interest rates and real estate tax rates
- Governmental rules, regulations and fiscal policies
- The enactment of unfavorable real estate, rent control, environmental, zoning or hazardous material laws
- Uninsured losses
- Anticipated market capitalization rates at the time of sale
Limited Transferability of Securities
Each Beneficial Owner will be required to represent that he is acquiring the Interests for investment and not with a view to distribution or resale, that such Beneficial Owner understands the Interests are not freely transferable and, in any event, that such Beneficial Owner must bear the economic risk of investment in the Interests for an indefinite period of time because: (i) the Interests have not been registered under the Act or applicable state “Blue Sky” or securities laws; and (ii) the Interests cannot be sold unless they are subsequently registered or an exemption from such registration is available. There will be no market for the Interests and the Beneficial Owner cannot expect to be able to liquidate their investment in case of an emergency. See “Restrictions on Transferability” in the PPM. Finally, the sale of the Interests may have adverse federal income tax consequences. See “Federal Income Tax Consequences” in the PPM.
Sale of the Property
The proceeds realized from the sale of the Properties will be distributed among the Beneficial Owners, but only after satisfaction of the claims of other third-party creditors and Affiliates of the Sponsor. The ability of a Beneficial Owner to recover all or any portion of its investment, accordingly, will depend on the amount of net proceeds realized from such sale and the amount of claims to be satisfied therefrom. There can be no assurance that the Beneficial Owners will realize gains on sale of the Properties.
Loss of Deposit
The Signatory Trustee may on behalf of the Trust retain the deposit of a Purchaser who is in default under the Purchase Agreement. See “Summary of Purchase Agreement and Escrow Instructions - Deposit; Liquidated Damages” in the PPM.
No Representation of Beneficial Owners
Each Beneficial Owner acknowledges and agrees in the Purchase Agreement and Escrow Instructions that legal counsel representing the Depositor, the Signatory Trustee, the Property Manager and their Affiliates do not represent, and shall not be deemed under the applicable codes of professional responsibility to have represented or to be representing, any or all of the Beneficial Owners.
Receipt of Compensation Regardless of Profitability
The Sponsor, the Signatory Trustee, the Property Manager and their Affiliates are entitled to receive certain significant fees and other significant compensation, payments and reimbursements from the acquisition and operation of the Properties regardless of whether the Properties operate at a profit. See “Estimated Use of Proceeds" and “Compensation of the Sponsor and Affiliates” in the PPM.
The Portfolio contains properties located that lie near the Atlantic Ocean and/or Gulf of Mexico, which is subject to frequent and sometimes destructive hurricanes. There can be no assurance that a sizable hurricane will not cause significant damage to the properties, in which case the business and financial condition of the Trust would be materially adversely affected. There is no guarantee that the Trust or the tenants will procure adequate hurricane insurance for the properties.
The Portfolio contains properties located in areas which can be subject to frequent and sometimes destructive tornadoes. There can be no assurance that a sizable hurricane will not cause significant damage to the properties, in which case the business and financial condition of the Trust would be materially adversely affected. There is no guarantee that the Trust or the tenants will procure adequate tornado insurance for the properties.
No RealtyMogul Site Visit
The properties within the Portfolio have not been physically inspected by a representative of RealtyMogul or any of its affiliates.
No Fiduciary Duty
The Trust, the Signatory Trustee, and the Property Manager and their Affiliates will not have a fiduciary duty to the Beneficial Owners as would be applicable to a limited liability company, partnership, or corporation and, therefore, may take actions that would not be in the best interests of one or more of the Beneficial Owners. As permitted under applicable Delaware law, the Signatory Trustee and the Delaware Trustee have expressly disclaimed all duties to the Beneficial Owner except for the duties expressly contained under the Trust Agreement.
The above is not intended to be a full discussion of all the risks of this investment. Please see the Risk Factors in the Private Placement Memorandum for a discussion of additional risks.
The above presentation is based upon information supplied by the Sponsor and others. Realty Mogul, Co., along with its respective affiliates, officers, directors or representatives (the "RM Parties") hereby advise you that none of them has independently confirmed or verified any of the information contained herein. The RM Parties further make no representations as to the accuracy or completeness of any such information and undertake no obligation now or in the future to update or correct this presentation or any information contained herein.
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