PREP Essential Net Lease I DST
Investment Description
PREP Essential Net Lease I DST was formed to acquire a 65,223-square-foot Shaw's Supermarkets store at 160 Paine Turnpike North, Berlin, Vermont, with approximately 406 surface parking spaces. The building was purpose-built for Shaw's in 1996 and has been continuously occupied by the tenant since March 1997. Shaw's Supermarkets, Inc. is a subsidiary of Albertsons Companies, Inc. The lease is absolute net, relieving the Trust and Master Tenant of all operating obligations and capital expenditures including capital repairs, environmental and fire/casualty insurance. It expires December 31, 2039 with six five-year renewal options, and rent steps from $1,271,848 annually through 2029 to $1,373,596 for 2030-2034 and $1,483,484 for 2035-2039.
The Trust is capitalized entirely with $23,985,832 of equity and takes on no debt. The purchase price is $20,300,000 against a November 30, 2025 as-is appraisal of $21,000,000, with closing anticipated on or around March 18, 2026. The Initial Beneficiary funds the purchase in advance using a bridge loan from PECO Real Estate Partners Net Lease Income REIT, an affiliate of the Sponsor and the parent of the Seller; that bridge is repaid from Offering proceeds. An affiliated Master Tenant holds the Master Lease and PREP Co., LLC serves as Asset Manager.
Projected Cash Flow
Highlights
Jerry Baker's Notes
Before you read these notes
Jerry Baker's Notes are his opinion, shared to help frame a conversation. They are not investment advice, a recommendation, or an offer, and they are not a substitute for the offering documents. Review the Private Placement Memorandum for complete information, including risk factors, before making any decision.
I understand · Show the notes[DRAFT — replace with your own view.] The tenant story is the strongest part: an Albertsons subsidiary that has occupied this purpose-built store for 29 years, on an absolute net lease with no landlord obligations at all — not even roof, structure or casualty — running to 2039 with six renewal options behind it. Load is 12.45%, recovered in year three of ten, and the asset was bought $700,000 under a November 2025 appraisal. All-cash, so no refinancing or rate exposure.
The questions are about who is on the other side of the trade. The Seller is a wholly owned subsidiary of PECO Real Estate Partners Net Lease Income REIT, the Bridge Lender is that same REIT, and both are Sponsor affiliates — so one affiliate group owns the asset, lends the money to buy it from itself, and is repaid out of investor equity. The property has been owned and managed by a PREP affiliate since 2022, so the $20.3 million price is not arm's length; the appraisal is the only independent check and it is only $700,000 above the price. The Memorandum also states plainly that the Sponsor is a newly formed entity with limited operating capital and no operating history, which matters because the Sponsor backs the Master Tenant through a Demand Note. Against that, Michael C. Phillips founded Phillips Edison & Company in 1991 and formed thirteen private funds there, so the principal-level record is real even where the sponsoring entity is not.
Economically the yield is thin and flat: $1,271,849 of rent is a 6.27% cap on the purchase price but 5.30% on what investors fund, and 5.00% after fees. It sits flat for five years and steps once. On a fourteen-year lease that is a bond-like return with grocery-anchor single-tenant risk and a 2039 residual.