PRIVATE PLACEMENT MEMORANDUM STRICTLY CONFIDENTIAL ONLY .

Transcription

PRIVATE PLACEMENT MEMORANDUMONLY FOR ACCREDITED INVESTORSSTRICTLY CONFIDENTIALName of Offeree:Copy No.ExchangeRight Net Leased Portfolio 16 DST100 Class 1 Beneficial Ownership Interests at 285,300 per InterestMinimum Purchase: 0.35051% Interest ( 100,000 of equity and 114,693 of estimated debt)Maximum Offering Amount: 28,530,000ExchangeRight Net Leased Portfolio 16 DST is a new Delaware statutory trust (the “Trust”) formed onMarch 1, 2017 pursuant to a Trust Agreement dated as of March 1, 2017 (the “Trust Agreement”). The Trust ownsthe following portfolio of 19 properties (collectively, the “Properties”): (i) 1309 South Main Street, Normal, Illinois61761; (ii) 6216 Morganford Road, St. Louis, Missouri 63116; (iii) 2024 Sheridan Road, Zion, Illinois 60099; (iv)8228 Hooper Road, Baton Rouge, Louisiana 70811; (v) 521 Evans City Road, Butler, Pennsylvania 16001; (vi)3220 Mariner Drive, Evansville, Indiana 47711; (vii) 203 South Washington Avenue, Jermyn, Pennsylvania 18433;(viii) 15 North Centre Avenue, Leesport, Pennsylvania 19533; (ix) 3005 West Columbus Drive, Tampa, Florida33607; (x) 710 Jefferson Avenue, Washington, Pennsylvania 15301; (xi) 6910 Mickens Road, Baton Rouge,Louisiana 70811; (xii) 120 S. US 287 Hwy, Mansfield, Texas 76063; (xiii) 1022 West Pioneer Parkway, Peoria,Illinois 61615; (xiv) 979 North Meridian Road, Kuna, Idaho 83634; (xv) 772 West Interstate 30, Royse City, Texas75189; (xvi) 2000 Garth Road, Baytown, Texas 77520; (xvii) 6510 Columbia Avenue, Hammond, Indiana 46320;(xviii) 33760 Center Ridge Road, North Ridgeville, Ohio 44039; and (xix) 11590 Gravois Road, St. Louis, Missouri63126. All of the Properties are 100% occupied, single-tenant, net-leased properties (three are operating as anAdvance Auto Parts, seven are operating as a Dollar General, one is operating as a Family Dollar, one is operatingas a Hobby Lobby, one is operating as a Sherwin Williams, two are operating as a Tractor Supply and four areoperating as a Walgreens) (the existing tenants and any new tenants at the Properties are referred to hereinindividually as a “Tenant” and collectively as the “Tenants”). ExchangeRight Net Leased Portfolio 16, LLC, anIowa limited liability company (the “Sponsor”), is the present owner of the Trust. ExchangeRight AssetManagement, LLC a California limited liability company and an Affiliate of the Sponsor (the “Manager”), has beenappointed to manage the Trust pursuant to the Trust Agreement. This Memorandum should be read in its entiretybefore making an investment decision.The Trust is hereby offering (this “Offering”) to prospective Accredited Investors (as hereinafter defined)(“Investors”) 100 newly-issued Class 1 beneficial ownership interests (the “Interests”) in the Trust at 285,300 perInterest, pursuant to the terms of this confidential private placement memorandum, including all exhibits attachedhereto and any supplements (this “Memorandum”). The Trust will offer and sell the Interests until 28,530,000(the “Maximum Offering Amount”) of Interests are sold or until 12-months after the Loan Closing Date(whichever is earlier).On May 30, 2017 (the “Loan Closing Date”), the Sponsor acquired the Properties for an aggregateacquisition cost of 53,537,992 from third parties unaffiliated with the Sponsor (collectively, the “Sellers”). TheSponsor assigned all of the Properties to the Trust within seven days of the Loan Closing Date pursuant to the termsof the Trust Agreement. The Properties are owned 100% by the Trust. The Sponsor purchased the Properties with aloan of 32,722,000 (the “Loan”) obtained from Barclays Bank PLC (the “Lender”), which Loan closed on theLoan Closing Date and the Loan was assigned to and assumed by the Trust. The Trust will sell beneficial interestsin the Properties to the Investors in Interests. The difference between the purchase price for the Properties and the 61,252,000 purchase price for the Interests (the “Purchase Price”), which consists of 28,530,000 in equity and 32,722,000 in debt, includes transaction costs, legal fees, reserves, Offering costs, real estate and short termfinancing costs (some of which are being paid to Affiliates of the Sponsor), an acquisition fee to the Sponsor, SellingCommissions, due diligence allowances, and related expenses.The Trust is a passive owner of the Properties and will not be involved in any manner in the activemanagement of the Properties. Concurrently with the acquisition of the Properties, the Trust will enter into a MasterLease Agreement (the “Master Lease”) with ExchangeRight NLP 16 Master Lessee, LLC, a Delaware limitedliability company and an Affiliate of the Sponsor (the “Master Lessee”), under which the Master Lessee will pay(Continued on next page)This Memorandum is dated May 30, 2017

rent to the Trust and sublease the Properties to the Tenants. Prior to any Disposition (as defined below) of theProperties by the Trust, the rent paid to the Trust by the Master Lessee will be the Trust’s sole source of income andthe sole source of funds available to make any monthly cash distributions to holders of Interests (individually, an“Owner,” and collectively, the “Owners”). The Properties and the rights under the Master Lease are the significantnon-cash assets of the Trust.The proceeds of this Offering will be used by the Trust and the Sponsor to pay short term financingarrangements (some of which were with Affiliates of the Sponsor), commissions, costs, fees, and expenses relatingto the acquisition of the Properties and this Offering, as well as to redeem, on a one-for-one basis, the 100 Class 2beneficial ownership interests in the Trust issued to the Sponsor on formation of the Trust (which Class 2 interestsare currently the only outstanding ownership interests in the Trust). The sole member of the Sponsor,ExchangeRight Real Estate, LLC (“ExchangeRight”) or its principals, are required by the Lender to maintain a 1%Class 1 beneficial interest in the Trust (one Interest) by purchasing a minimum of one Interest in this Offering on thesame terms and conditions as are available to all Owners and to hold such 1% interest as long as the Loan isoutstanding; provided that this one Interest will be purchased net of Selling Commissions and Expenses and certainother Sponsor related fees and expenses. Apart from this 1% interest none of the Sponsor nor its Affiliates will ownany Class 1 interests and upon the sale of the Interests, no Class 2 interests will remain outstanding. The Trust willnot close this Offering until all the Interests are sold and all the Class 2 interests are redeemed (or until the offeringtermination date, as set forth below). Pursuant to the Loan Documents, within 12-months of the Loan Closing Date,any unissued Class 1 interests must be sold to third parties unrelated to the Sponsor or any Class 2 interestsremaining outstanding must be contributed to the Trust in favor of the Class 1 beneficial owners for no additionalconsideration.An investment in the Interests is highly speculative and involves substantial risks. Owners must beprepared to bear the economic risk of an investment in the Interests for an indefinite period of time and beable to withstand a total loss of their investment. See “Who May Invest” and “Risk Factors” below.These securities have not been approved or disapproved by the U.S. Securities and ExchangeCommission (“SEC”) or the securities regulatory authority of any state, nor has the SEC or any securitiesregulatory authority of any state passed upon the accuracy or adequacy of this Memorandum. Anyrepresentation to the contrary is a criminal offense.These securities are subject to restrictions on transferability and resale and may not be transferredor resold except as permitted under the Securities Act of 1933, as amended (the “Securities Act” or “Act”)and applicable state securities laws, pursuant to registration or exemption therefrom. In addition, theInterests may only be transferred in compliance with the Trust Agreement and the terms of the Loan.Owners should be aware that they will be required to bear the financial risks of this investment for anindefinite period of time.The main goals of the Trust are to (i) operate and hold the Properties pursuant to the Master Lease and theagreements and other documents required by the Lender which agreements were assumed by the Trust with respectto the Loan (the “Loan Documents”); (ii) preserve the capital investment of the Owners; (iii) realize incomethrough the ownership and eventual sale, disposition, transfer, merger to facilitate a tax-deferred exchange pursuantto Section 1031 of the Code or exchange roll-up transaction pursuant to Section 721 of the Code with respect to theProperties (collectively, a “Disposition”); (iv) make monthly distributions to the Owners from cash generated by theProperties; and (v) take only such other actions as the Manager deems necessary to carry out the foregoing. TheTrust currently estimates monthly distributions to be in an amount sufficient to provide the following approximateestimated cash flow returns on the Owners’ investment:(i) 6.78% in year one;(ii) 6.78% in year two;(iii) 6.78% in year three;(iv) 6.78% in year four;(v) 6.82% in year five;(vi) 6.91% in year six;ii

(vii) 6.91% in year seven;(viii) 6.91% in year eight;(ix) 6.91% in year nine; and(x) 7.02% in year 10.However, there is no assurance that the Trust will be able to meet any of the above goals, including as tothe manner, amount and timing of any distributions to Owners, as any such distributions will depend on actualincome earned by the Trust. As the Loan will be secured by the Properties, any default under the Loan could have amaterial adverse effect on the ability of the Trust to receive or distribute income. The Loan Agreement requires aQualified Transfer of the Loan by the end of year seven (7) of the Loan term or a cash flow sweep will commence.As the Trust’s objective is to maximize value to Owners through a portfolio aggregation and sale, transfer, or mergerprior to year seven to facilitate a tax-deferred exchange pursuant to Section 1031 of the Code, or exchange roll-uptransaction pursuant to Section 721 of the Code, this provision is not expected to have an impact on the Trust as it isexpected to meet the Qualified Transfer requirements (refer to the “Exit Strategy” in Exhibit I of the Memorandum).As a result, ten years of cash flows are being presented to show the expected cash flows of the Properties to theTrust including following a Qualified Transfer prior to the end of year seven.This Memorandum describes the key features of this Offering, including a description of a number of risksrelating to an investment in the Interests. You should carefully read this entire Memorandum before you decide toinvest. If you are considering an investment in the Interests for purposes of an exchange designed to comply withSection 1031 of the Internal Revenue Code of 1986, as amended (the “Code”), you should consult with your owntax advisor about this Offering’s tax aspects and your individual situation. No representation or warranty of anykind is made with respect to the treatment of the Interests by the Internal Revenue Service (the “IRS”). The use of aDelaware statutory trust structure for this type of investment is a relatively recent development. The Trust isdifferent from traditional investment vehicles in many aspects and due to its structure, the structure of this Offeringand the terms of the Loan. You should also be aware that certain conflicts of interest may arise by and among theOwners and the Trust, the Sponsor, the Manager, the Master Lessee and their Affiliates.In order to subscribe for Interests, prospective Investors will be required to (i) sign the PurchaseAgreement, a copy of which is attached hereto as Exhibit B (“Purchase Agreement”); (ii) complete and sign thePurchaser Questionnaire, a copy of which is attached hereto as Exhibit C (“Purchaser Questionnaire”); and(iii) pay the full purchase price for their Interests, which payment will be held in the Trust’s bank account untilacceptance by the Manager, in its sole discretion, of that subscription. The Trust has not set a minimum offeringamount for this Offering. All proceeds from the sale of Interests will be delivered directly to the Trust’s operatingaccount and be available for immediate use by the Trust at its discretion.YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING:Do not construe the contents of this Memorandum as legal or tax advice. Consult your own independentcounsel, accountant or business advisor as to legal, tax and related matters concerning an investment inInterests. Neither the Trust, the Sponsor, nor any of their affiliates makes any representation or warranty ofany kind with respect to the acceptance by the Internal Revenue Service or any state taxing authority of yourtreatment of any item on your tax return or the tax consequences if you are investing in Interests as part of alike-kind exchange under Section 1031 of the Internal Revenue Code of 1986, as amended.The Interests offered hereby are highly speculative and involve substantial risks. Prospective Investorsmust read and carefully consider the discussion set forth under “RISK FACTORS” for a complete discussionof risks. Issues to consider and risks of an investment in an Interest include, among other things, thefollowing: complete reliance on the Manager and Master Lessee to operate, manage and maintain the Properties; limited to no control over the operation of the Properties and the timing of its Disposition pursuant tothe Trust Agreement; lack of liquidity;iii

lack of diversity of investment; various conflicts of interest among the Sponsor, the Manager, the Master Lessee and their Affiliates; various risks associated with ownership of real estate generally; the Purchase Price for the Interests offered; and certain tax risks.The mailing address of the Trust for purposes of this Offering is 200 S. Los Robles Ave.,

PRIVATE PLACEMENT MEMORANDUM STRICTLY CONFIDENTIAL ONLY FOR ACCREDITED INVESTORS (Continued on next page) This Memorandum is dated May 30, 2017 Name of Offeree: _ Copy No._ ExchangeRight Net Leased Portfolio 16 DST 100 Class 1 Beneficial Ownership Interests at 285,300 per Interest Minimum Purchase: 0.35051% Interest ( 100,000 of equity and