Net Leased Portfolio 28, DST

LA, MI, IL, IN, SC, TN, TX, VA, WI

ASSET CLASS:  Net Leased Retail
OFFERING SIZE:  $53,157,000
MINIMUM INVESTMENT:  $100,000
LEVERAGE:  54.61%
# OF PROPERTIES:  23
HOLD PERIOD:  Up to 7 Years
CURRENT OCCUPANCY:  100%
TARGETED YR.-1 RETURN:  6.83%

A diversified portfolio of primarily investment grade net-leased real estate with anticipated annual distributions from operations of 6.82%, which are targeted to grow over time based on contractual rent escalations built into many of the portfolio’s tenant leases.

Net-Leased Portfolio 28 consists of 23 properties that are diversified across 22 markets and 9 states, and that are leased to 8 national credit tenants that operate in the medical, grocery, discount retail, agricultural, pharmaceutical, and discount automotive industries. e portfolio's weighted average lease length is 11.7 years.

According to the third quarter 2018 Net Leased Market Report completed by The Boulder Group, cap rates during the quarter for the single-tenant net leased retail product increased by five basis points, but are up 18 basis points from their historic low of 6.07% set during the fourth quarter of 2017. Cap rates in the net leased office sector increased by five basis points in the most recent quarter while cap rates for the net leased industrial sector declined by 2 basis points.

While the demand for net leased assets remains strong, upward pressure on interest rates is creating upward pressure on cap rates. In the third quarter of 2018, the 10-year treasury yield peaked at 3.10%, the second highest level since 2014. The rising cap rate environment has the greatest impact on properties with no rental escalation, weak credit properties, or those in secondary/tertiary markets. In addition, assets priced above $12 million that are typically sold to institutional buyers experienced significant cap rate increases because institutional buyers are more sensitive to the volatility of financing markets as they struggle to meet internal fixed yield targets.

The net lease market is expected to remain active during the balance of 2018 as both institutional and fund investors attempt to reach acquisition allocations by year-end. Although the supply of net leased properties increased slightly during the quarter, there is a reported lack of new construction assets with long-term leases. Cap rates for recently constructed properties with strong credit tenants experienced little or no cap rate movement. The majority of net leased participants expect cap rates to remain in a similar range as the past few years.

 

Targeted 1st-Year Cash-on-Cash: 6.83%
Targeted Cash Range: 6.83% - 7.26%
Targeted Cash Average: 7.02%
Projected IRR: 5.35%

All-In Price: $117,100,000
Purchase Price: $102,971,000
Appraised Value: $103,230,500
Loan Amount: $63,943,000
Equity Raise: $53,157,000
Trust Reserves: $1,787,146
Trust Reserves to All-In Price: 1.53%
Ongoing Reserves Yrs. 1-10: $411,316
Total Reserves to All-In Price: 1.88%
Net Load: $12,341,145
Net load to Equity: 23.22%
Net Load to All-In Ratio: 10.54%
Appraised Net Load: $12,082,354
Appraised Net Load to Equity: 22.73%
Appraised Net Load to All-In Price: 10.32%

Net Operating Income: $6,559,000
Purchase Cap Rate: 6.37%
All-In Cap Rate: 5.60%
Cap Rate Spread: 77 bps
Breakeven Exit Cap: 5.75%
Breakeven Exit Cap Rate Spread: -62 bps
Appraised Cap: 6.35%
Appraised Cap Rate Spread: -60 bps
Proforma Expense Growth: .38%
Average NOI Growth: .34%
Average Breakeven Occupancy: 43.37%

Loan Amount: $63,943,000
Term: 10 Years Fixed
Interest Only Period: 10 Years
Interest Rate: 4.032%
Prepayment: 1% of the outstanding principal
Lender: Societe Generale Financial Corporation
LTV: 54.61%
Nonrecourse: Yes to the Trust

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The contents of this communication: (i) do not constitute an offer of securities or a solicitation of an offer to buy securities, (ii) offers can be made only by the confidential Private Placement Memorandum (the “PPM”) which is available upon request, (iii) do not and cannot replace the PPM and is qualified in its entirety by the PPM, and (iv) may not be relied upon in making an investment decision related to any investment offering by the issuing company, or any affiliate, or partner there of the issuer. All potential investors must read the PPM and no person may invest without acknowledging receipt and complete review of the PPM. With respect to the “targeted” goals and performance levels outlined herein, these do not constitute a promise of performance, nor is there any assurance that the investment objectives of any program will be attained. These “targeted” factors are based upon reasonable assumptions more fully outlined in the Offering Documents/ PPM. Consult the PPM for investment conditions, risk factors, minimum requirements, fees and expenses and other pertinent information with respect to any investment. These investment opportunities have not been registered under the Securities Act of 1933 and are being offered pursuant to an exemption therefrom and from applicable state securities laws. Past performance and statements regarding current occupancy and earnings are no guarantee of future results. All information is subject to change. You should always consult a tax professional prior to investing. Investment offerings and investment decisions may only be made on the basis of a confidential private placement memorandum issued by the issuer, or one of its partner/issuers. The issuer does not warrant the accuracy or completeness of the information contained herein. Some offerings are subject to a “cooling off” period and are not available to all investors. 
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Securities offered through Emerson Equity LLC Member: FINRA/SIPC. Only available in states where Emerson Equity LLC is registered. Emerson Equity LLC, and the issuer are not affiliated.