Net Leased Portfolio 28, DST


ASSET CLASS:  Net Leased Retail
OFFERING SIZE:  $53,157,000
LEVERAGE:  54.61%
HOLD PERIOD:  Up to 7 Years

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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