ExchangeRight REIT Extends Distributions Streak, Covered by Net Cash
Driven by ongoing portfolio growth and stable occupancy, ExchangeRight Essential Income REIT – a non-traded real estate investment trust focused on net-leased properties operating in “necessity-based” retail and healthcare industries – reported positive performance metrics through September. The company declared and fully covered $29.7 million in cash distributions with net cash from operating activities for the third quarter of 2025 – extending its record of uninterrupted monthly distributions.
Rental revenue rose to $21.76 million, a nearly 9.2% increase from $19.93 million in the same quarter last year. The growth was primarily attributed to net acquisitions over the past year. As of Sept. 30, the REIT’s portfolio consisted of 361 properties with 98.6% occupancy, up from 353 properties and 98.5% occupancy a year earlier.
The REIT reported funds from operations of $10.67 million, up approximately 4.85% from $10.18 million in the third quarter of 2024. Adjusted funds from operations increased more than 6.5% year-over-year to $11.23 million. On a per-share basis, FFO was $0.41, compared to $0.42 in the prior-year period, while AFFO was $0.43, down slightly from $0.44, reflecting a higher share count.
Distributions were supported by approximately $32.7 million in net cash from operating activities, compared to $33 million in the same period in 2024.
The REIT’s annualized distribution rate is 6.37%, based on a declared net asset value of $27.30 per share as of Sept. 30, 2025, reflecting a 0.26% decrease from the NAV at the end of 2024.
Net loss for the quarter was $443,000, compared to $118,000 in the same period in 2024. This was attributed to higher interest and depreciation expenses tied to recent acquisitions. Net income from operations rose to approximately $9 million, up from $8.1 million in the third quarter of 2024.
The REIT acquired two properties during the quarter for a combined $3.795 million. Total NAV stood at approximately $711.4 million. The portfolio’s weighted average lease term remained strong at six years, with Walgreens and Dollar General comprising the two largest tenant exposures at 17.8% and 15.5% of base rent, respectively.
In July, the operating partnership and the company increased the revolving credit facility in the amount of $15 million pursuant to an incremental revolving commitment from an additional lender. These additional commitments increased the REIT’s borrowing capacity under the credit agreement’s revolving credit facility to $150 million at Sept. 30.
On Oct. 3, shortly after quarter-end, the revolving credit facility was increased again by $35 million, bringing total borrowing capacity under the agreement to $185 million. As of Sept. 30, the company had borrowed $132.4 million with a blended interest rate of 6.21%.
Earlier this month, the REIT’s sponsor, ExchangeRight, fully subscribed its $28.85 million ExchangeRight Essential Income 4 DST. The private placement offering is part of the company’s Essential Income DST series, structured to allow accredited investors potential access to the Essential Income REIT via a tax-deferred Section 721 exchange after a two-year hold period.
In July of this year, the REIT announced the launch of subclasses for its ER shares. The subclasses are designed to increase accessibility through custodians and investment platforms while preserving what ExchangeRight says are “the distinct benefits that make Class ER a compelling option for investors.” As of July 7, the subclasses’ targeted internal rate of return was 10.01% for Class ER-A shares, 11.39% for Class ER-D shares, and 11.64% for Class ER-I shares.
ExchangeRight and its affiliates’ vertically integrated platform features more than $6.8 billion in assets under management that are diversified across more than 1,400 properties and 27 million square feet throughout 48 states, as of Sept. 30, 2025.
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