ExchangeRight Income Fund Swings to Profit Amid Revenue Growth

TL;DR

**ExchangeRight Income Fund is turning the corner with strong revenue growth, but watch those rising interest expenses.**

AI Summary

ExchangeRight Income Fund reported a net income of $3.604 million for the nine months ended September 30, 2025, a significant improvement from a net loss of $732,000 in the same period of 2024. Total revenues increased by 8.43% to $69.497 million for the nine months ended September 30, 2025, up from $64.096 million in 2024, primarily driven by a rise in rental revenue to $65.603 million from $60.461 million. However, the company experienced a net loss of $443,000 for the three months ended September 30, 2025, compared to a net loss of $118,000 in the prior year's quarter, largely due to increased interest expense, which rose to $9.450 million from $8.266 million. Mortgage loans payable, net, decreased to $538.645 million as of September 30, 2025, from $584.765 million at December 31, 2024, while the revolving credit facility increased to $132.391 million from $82.452 million. The fund also recorded a gain on sales, net, of $5.184 million for the nine months ended September 30, 2025, compared to $69,000 in 2024. Total assets slightly decreased to $1.247 billion from $1.259 billion, and total equity decreased to $529.807 million from $545.779 million over the same period.

Why It Matters

This filing shows ExchangeRight Income Fund's ability to significantly improve its net income year-over-year, driven by strong rental revenue growth. For investors, the shift from a net loss to a net income of $3.604 million for the nine-month period indicates operational improvements and potentially better returns, despite a quarterly loss. The increase in the revolving credit facility suggests a strategic shift in financing, which could impact future interest expenses and liquidity. In a competitive REIT market, sustained revenue growth and a positive net income trend are crucial for attracting and retaining investors, signaling resilience and effective asset management.

Risk Assessment

Risk Level: medium — The fund's risk level is medium due to increasing interest expenses, which rose to $9.450 million for the three months ended September 30, 2025, from $8.266 million in the prior year, contributing to a quarterly net loss. Additionally, the revolving credit facility increased significantly to $132.391 million from $82.452 million, indicating higher leverage and potential exposure to interest rate fluctuations, as explicitly mentioned in the 'inflation and interest rate fluctuations' risk factor.

Analyst Insight

Investors should closely monitor ExchangeRight Income Fund's interest expense trends and its strategy for managing the increased revolving credit facility. While the nine-month net income is positive, the quarterly loss driven by interest costs warrants caution. Consider the fund's ability to maintain rental revenue growth to offset rising financing costs before making further investment decisions.

Financial Highlights

debt To Equity

1.35

revenue

$69.497M

operating Margin

N/A

total Assets

$1.247B

total Debt

$671.036M

net Income

$3.604M

eps

N/A

gross Margin

N/A

cash Position

$7.287M

revenue Growth

+8.43%

Revenue Breakdown

Key Numbers

• $3.604M — Net Income (Nine months ended Sep 30, 2025, up from a $732K loss in 2024)
• $69.497M — Total Revenues (Nine months ended Sep 30, 2025, an 8.43% increase from 2024)
• $65.603M — Rental Revenue (Nine months ended Sep 30, 2025, up from $60.461M in 2024)
• $443K — Net Loss (Three months ended Sep 30, 2025, compared to $118K loss in 2024)
• $9.450M — Interest Expense (Three months ended Sep 30, 2025, up from $8.266M in 2024)
• $538.645M — Mortgage Loans Payable, Net (As of Sep 30, 2025, down from $584.765M at Dec 31, 2024)
• $132.391M — Revolving Credit Facility (As of Sep 30, 2025, up from $82.452M at Dec 31, 2024)
• $5.184M — Gain on Sales, Net (Nine months ended Sep 30, 2025, significantly up from $69K in 2024)
• $1.247B — Total Assets (As of Sep 30, 2025, a slight decrease from $1.259B at Dec 31, 2024)
• $529.807M — Total Equity (As of Sep 30, 2025, a decrease from $545.779M at Dec 31, 2024)

Key Players & Entities

• ExchangeRight Income Fund (company) — registrant
• SEC (regulator) — filing authority
• $3.604 million (dollar_amount) — net income for nine months ended September 30, 2025
• $732,000 (dollar_amount) — net loss for nine months ended September 30, 2024
• $69.497 million (dollar_amount) — total revenues for nine months ended September 30, 2025
• $64.096 million (dollar_amount) — total revenues for nine months ended September 30, 2024
• $443,000 (dollar_amount) — net loss for three months ended September 30, 2025
• $118,000 (dollar_amount) — net loss for three months ended September 30, 2024
• $9.450 million (dollar_amount) — interest expense for three months ended September 30, 2025
• $132.391 million (dollar_amount) — revolving credit facility as of September 30, 2025

FAQ

Risk Factors

• Increased Interest Expense [medium — financial]: Interest expense rose to $9.450 million for the three months ended September 30, 2025, from $8.266 million in the prior year's quarter. This increase contributed to a net loss in the most recent quarter.
• Debt Structure Changes [medium — financial]: Mortgage loans payable decreased by $46.12 million to $538.645 million as of September 30, 2025, while the revolving credit facility increased by $49.939 million to $132.391 million. This shift indicates a reliance on short-term financing.
• Equity Decline [low — financial]: Total equity decreased to $529.807 million as of September 30, 2025, from $545.779 million at December 31, 2024. This reduction, coupled with a slight decrease in total assets, warrants monitoring.

Industry Context

The real estate investment trust (REIT) sector, particularly those focused on essential income properties, typically benefits from stable rental income streams. However, rising interest rates can increase borrowing costs and impact property valuations. Competition for well-located, income-generating properties remains a key factor, alongside tenant retention and lease renewal strategies.

Regulatory Implications

As a publicly traded entity, ExchangeRight Income Fund is subject to SEC regulations and reporting requirements. Changes in accounting standards for leases or revenue recognition could impact financial reporting. Compliance with debt covenants and disclosure requirements is crucial for maintaining investor confidence.

What Investors Should Do

1. Monitor interest expense trends and their impact on quarterly profitability.
2. Analyze the shift in debt structure from long-term mortgages to revolving credit facilities.
3. Evaluate the sustainability of rental revenue growth against rising operating costs.
4. Assess the impact of the gain on sales on overall financial performance.

Glossary

Revolving credit facility

A type of loan that allows a borrower to draw down, repay, and redraw funds up to a certain limit over a specified period. It provides flexible access to capital. (An increase in the revolving credit facility balance suggests increased short-term borrowing to manage operations or fund activities.)

Mortgage loans payable, net

The outstanding principal balance of loans secured by real estate, net of any unamortized discounts or premiums. (A decrease in this indicates a reduction in long-term debt secured by the fund's properties.)

Right-of-use asset

An asset representing a lessee's right to use an underlying asset for the lease term under a lease agreement. (Represents the value of leased properties that the fund has the right to use.)

Intangible lease assets, net

Represents the value of favorable lease terms acquired, net of amortization. (Reflects the value of advantageous lease agreements that the fund holds.)

RSLCA notes receivable from affiliates

Notes receivable from affiliated entities related to sale-leaseback transactions. (Indicates financial arrangements with related parties, which can have implications for transparency and risk.)

Year-Over-Year Comparison

ExchangeRight Income Fund shows a significant turnaround in profitability for the nine months ended September 30, 2025, with net income of $3.604 million compared to a net loss in the prior year. Total revenues grew by 8.43%, driven by rental income. However, the most recent quarter (three months ended September 30, 2025) saw a net loss, primarily due to a substantial increase in interest expenses. Debt structure has shifted, with a decrease in mortgage loans payable offset by a significant rise in the revolving credit facility, while total assets and equity have slightly declined.

Key Financial Figures

• $0.01 — nding: 9,930,173 Class A Common Shares, $0.01 par value per share; 5,717,065 Class I

Filing Documents

• er-20250930.htm (10-Q) — 5671KB
• er-ex31_1.htm (EX-31.1) — 15KB
• er-ex31_2.htm (EX-31.2) — 15KB
• er-ex32_1.htm (EX-32.1) — 9KB
• er-ex32_2.htm (EX-32.2) — 9KB
• 0001193125-25-258322.txt ( ) — 15560KB
• er-20250930.xsd (EX-101.SCH) — 1545KB
• er-20250930_htm.xml (XML) — 2806KB

Financial Information

Part I. Financial Information Item 1.

Financial Statements

Financial Statements Condensed Consolidated Balance Sheets - September 30, 2025 and December 31, 2024 (Unaudited) 1 Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - Three and Nine Months ended September 30, 2025 and 2024 (Unaudited) 3 Condensed Consolidated Statements of Equity - Nine Months ended September 30, 2025 and 2024 (Unaudited) 4 Condensed Consolidated Statements of Cash Flows - Nine Months ended September 30, 2025 and 2024 (Unaudited) 6 Notes to Condensed Consolidated Financial Statements 8 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 27 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 52 Item 4.

Controls and Procedures

Controls and Procedures 52

Other Information

Part II. Other Information Item 1.

Legal Proceedings

Legal Proceedings 53 Item 1A.

Risk Factors

Risk Factors 53 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 53 Item 3. Defaults Upon Senior Securities 56 Item 4. Mine Safety Disclosures 56 Item 5. Other Information 56 Item 6. Exhibits 57

Signatures

Signatures 58 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements contained in this Current Report on Form 10-Q other than historical facts may be considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and, as such, may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of ExchangeRight Income Fund, d/b/a the ExchangeRight Essential Income REIT (the "Company") to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. For these statements, the Company claims the protections of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements, which are based on certain assumptions and describe the Company's future plans, strategies and expectations, are generally identifiable by use of the words "may", "will", "should", "estimates", "projects", "anticipates", "believes", "expects", "intends", "future", and words of similar import, or the negative thereof. Forward-looking statements in this Current Report on Form 10-Q include information about possible or assumed future events, including, among other things, discussion and analysis of our future financial condition, results of operations, our strategic plans and objectives, occupancy, leasing rates and trends, liquidity and ability to meet future obligations, anticipated expenditures of capital and other matters. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Form 10-Q is filed with the Securities and Exchange Commission. Any such forward-looking statements are subject to unknown risks, uncertainties, and other factors, which in some cases are beyond our control, and are based on a number of assumptions involving judgments with resp

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS ExchangeRight Income Fund (d/b/a ExchangeRight Essential Income REIT) Condensed Consolidated Balance Sheets (Unaudited) September 30, December 31, 2025 2024 ASSETS Real estate: Land $ 226,892,000 $ 226,751,000 Buildings and improvements 988,837,000 968,186,000 1,215,729,000 1,194,937,000 Less accumulated depreciation ( 110,284,000 ) ( 89,628,000 ) Real estate, net 1,105,445,000 1,105,309,000 Intangible lease assets, net 59,449,000 65,142,000 RSLCA notes receivable from affiliates 22,110,000 29,243,000 Restricted cash 11,351,000 11,920,000 Cash and cash equivalents 7,287,000 9,348,000 Receivables 10,153,000 9,831,000 Notes receivable from affiliates 21,400,000 21,400,000 Right-of-use asset 4,737,000 4,700,000 Other assets 2,769,000 1,836,000 Due from affiliates 2,542,000 - TOTAL ASSETS $ 1,247,243,000 $ 1,258,729,000 LIABILITIES AND EQUITY Mortgage loans payable, net $ 538,645,000 $ 584,765,000 Revolving credit facility 132,391,000 82,452,000 Intangible lease liabilities, net 22,847,000 22,930,000 Accounts payable, accrued expenses and other liabilities 13,629,000 10,332,000 Right-of-use liability 5,343,000 5,185,000 Pending trade deposits 795,000 3,096,000 Distributions payable 3,760,000 3,690,000 Due to affiliates 26,000 500,000 Total liabilities 717,436,000 712,950,000 Commitments and contingencies - - 1 ExchangeRight Income Fund (d/b/a ExchangeRight Essential Income REIT) Condensed Consolidated Balance Sheets (Unaudited) continued Equity: Class A common shares, $ 0.01 par value per share, 79,443,953 and 79,273,374 shares authorized, 10,011,752 and 10,322,475 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively $ 100,000 $ 103,000 Class I common shares, $ 0.01 par value per share, 79,443,95

View Full Filing

View this 10-Q filing on SEC EDGAR