Change Agent: Joshua Ungerecht, ExchangeRight 

We’re talking to leaders about significant changes in the industry and their organizations – progress regarding product, process, technology, or culture. We’re curious about the how and the why. And we’re asking about what changes are next. 

Joshua Ungerecht, Managing Partner at ExchangeRight, highlighted a recent milestone of the company that resulted in the greatest satisfaction and the specific challenges it overcame. Additionally, he elaborated on the critical changes he anticipates for the industry in the future and the advancements he anticipates.    

A Triumph to Celebrate: What recent organizational accomplishment brings you the most satisfaction? What specific challenges did it overcome, and what key factors led to its success?  the essential elements for significant progress within your organization and the industry?   

We have recently surpassed $6 billion in assets under management in the service of over 8,400 investors across the country. Though a lot has changed since we first launched ExchangeRight well over a decade ago, the one thing that has remained consistent is our commitment to put investors first in all that we do. As a result of this commitment, 100% of our offerings have met or exceeded projections for all our investors since our inception despite considerable economic and market volatility throughout the same period. Past performance does not guarantee future results. 

Catalysts for Change: What are the essential elements for significant progress within your organization and the industry?  

The most important element for achieving significant progress has been putting investors first and doing what is in their best interest. Getting these right shapes all aspects of our business and has ultimately allowed us to achieve an unparalleled track record of performance in our industry. Protecting investor capital drives which asset classes we focus on given where we are in the economic cycle, our stringent acquisition standards and rigorous due diligence, how proactively we steward assets, and how we structure our offerings to align our interests with investors and more effectively serve their needs.  

The combination of these factors has enabled us to never miss or lower a monthly distribution across all our offerings since our inception—even through the economic lockdowns and recession that followed the COVID crisis. We have never lost investor capital, and we have taken more than a third of our nearly 100 offerings full cycle, with 100% of those offerings meeting or exceeding projections. Past performance is no guarantee of future results. 

The Road Ahead: Looking forward, what critical changes do you foresee for the industry in the coming years? What advancements do you hope for?  

The baby boom and silent generations currently have over $23 trillion in real estate, which will be transitioning from active to passive management at an increasing pace over the next decade. To deliver the capital preservation and stable income that these investors need to support themselves through retirement, advisors and representatives must understand how to properly analyze and utilize tax-advantaged strategies like 1031 and 721 exchanges as well as investment structures like Delaware Statutory Trusts (DSTs) and Real Estate Investment Trusts (REITs).  

While meeting tax deferral needs will become increasingly critical, it is just as important to ensure that the potential tax benefits of any investment do not overshadow the fundamental due diligence necessary to determine whether it is truly suitable to meet clients’ core financial goals. For example, it is prudent to match retired investors’ need for capital preservation and stable, tax-advantaged income with DSTs and REITs that are specifically designed to target recession-resilient industries and tenants. This can provide far more stability amid economic volatility, which is of particular importance for retired investors who may rely on the monthly income and do not have the tolerance or time horizon to suffer significant losses. 

Furthermore, though REITs are often utilized to achieve higher tax-advantaged income for investors, it is crucial to verify that a REIT’s Adjusted Funds from Operations (AFFO) fully covers its dividend. A dividend that is fully covered by AFFO is far more sustainable for investors and avoids the trap of paying cash flow distributions from investor capital or financing. Though one might expect that full AFFO coverage would be common, many REIT sponsors advertise a higher dividend than they can support with AFFO to raise more capital, which often leads to long-term reductions in income and impairments in value.  

Advisors and representatives have an opportunity to band together on behalf of their investors and demand transparency and consistency from sponsors on fundamental issues like underwriting, dividend coverage, reporting, and performance. Standards of reasonable due diligence can go a long way to ensure that offering structures not only meet tax needs but are also aligned with clients’ long-term financial needs and goals. It will be vital for the industry to become more adept at sifting the wheat from the chaff to avoid the mistakes of past cycles that have hurt investors along with the businesses and reputations of advisors and representatives. 

Pictured: Joshua Ungerecht, Managing Partner, ExchangeRight 

Click here to see the full Change Agents: Leaders Driving Progress series