Single Tenant Insider
IN THIS ISSUE:
• Market Update
• Industry Soundbites
• Ask Nancy
• Recent Sales
• Acquisition Opportunities
• Properties Wanted
Nancy Miller, CCIM
Net Lease Investments
Bull Realty, Inc.
404-876-1640 x 118
- NEW TO MARKET
- $1,187,000/ 7.0% cap
- 10 yrs remaining on 11 year NNN lease with options
- Rare 3% rent bump in 11th year
- REDUCED PRICE!
- $998,750/ 7.9% cap
- 7 yrs remaining on 15 year NN lease with options
- $1,029,000/7.9% cap
- 6 years remaining on a 10 yr NN lease with options
Union City, GA
- $795,000/7.3% cap rate before precentage rent
- 5 years remaining on extended NN lease with options
- New construction
- 6.0% cap rate
- 15 year NNN
- High growth Charleston MSA
- Planned June/July completion
- Large Applebee's franchisee
- 6.85% cap rate
- 9+ years remaining on NNN lease
Contact Nancy for more details.
♦ Single Tenant Properties - $2.5-$4M
- Larger metros
- 10+ years
- 6%+ cap
Would you like to see what your property would bring in today's market? CLICK HERE
Nancy Miller, President of National Net Lease Investments with Bull Realty and Tim Kinney, Vice President of Capital Markets with Marcus & Millichap joined Michael in Studio One to discuss what's hot in single tenant net lease.
1031 Exchanges Remain Great Investor Strategy
By Nancy Miller, CCIM
The IRS 1031 exchange is used by many investors to defer, not eliminate capital gains on their investment properties. It remains a great strategy for first time and repeat investors, but must be employed correctly.
First time investors of qualified “like kind” assets (land, building, timber, or other non-primary residence) that has a very low basis are ideal candidates. Here are two examples:
#1 Mike and his family sold a small commercial building in Manhattan that has been in the family since the early 1900’s to a developer who offered them well over $10M. Their “basis” or original cost plus capital expenses was around $500K. In order to defer the long term capital gains, they decided to use the IRS 1031 exchange strategy and purchased several NNN investment properties equal to the sale of the building. The gain is rolled into the new investments until a later time.
#2 Another buyer, Ernie in Detroit owned a NNN leased Aarons Rents in Georgia. Bull Realty listed and sold the net lease property for him. Since he originally acquired the Aaron’s as part of a 1031 exchange, he wanted to roll the appreciation into another investment property. We identified and he purchased a new construction Family Dollar in Louisiana. Again, he deferred, but did not eliminate the gain.
There are many “do’s” and “don’ts” to comply with the regulations of 1031 exchanges that are very specific. Investors are always advised to contact their tax advisor or a 1031 intermediary, especially PRIOR to the sale of the “relinquished” property or they will be disqualified from the start.
Some common questions about 1031 exchanges.
1. Is there any minimum purchase size that I need to qualify for to do a 1031 Exchange? No. If the “gain” that would be paid without a 1031 exchange is not large, you want to consider the costs associated with doing the exchange vs. paying the taxes.
2. How long do I have to purchase a replacement property if I am doing a 1031 exchange? You have 45 calendar days to IDENTIFY properties for your potential exchange and must purchase SOME/ALL of them within 180 calendar days of the sale of your “relinquished” (SOLD) property. Several important rules apply to the identification. Most commonly, exchangers identify up to 3 potential properties and must close on at least 1 of those to qualify for the exchange rules.
3. Can I do a 1031 exchange for my personal residence? No, it must be an investment property which could be apartments, land, timber, and a host of other qualifying properties.
4. These exchanges sound confusing. Is there somewhere that I can get more information? There are several 1031 intermediaries attorneys that can provide more specific guidelines. Here is an electronic newsletter from one of many 1031 intermediaries, ADE, that covers many of the pitfalls to consider.
If you are considering doing a 1031 exchange, whether buying or selling an investment property, give us a call. We specialize in this with our clients and can offer tools and professionals to assist you in your decisions.
"Triple Net REIT Roundup - Morgan Stanley Net Lease Survey says "Cap Rates Begin Adjusting To Higher Debt Costs" The results of Morgan Stanley’s quarterly AlphaWise 'Triple Net REIT Roundup," which gets a market view from 25 national single tenant net lease brokers (Bull Realty's Nancy Miller among them), says that brokers are more positive on deal pipelines in Q1 2017 than in Q4 2016. Although cap rates have begun adjusting to higher debt costs, investment spreads are still attractive. Around 70% of brokers surveyed now see interest rates as the most important factor impacting deal volume in the next three months...Read more
♦ Starbucks' Answer to Trump Ban: Hire 10,000 Refugees
Starbucks CEO Howard Schultz sent a letter on Sunday to all employees addressing the recent executive order signed by President Trump that bans refugees from certain countries from entering the U.S. Read more
♦ Wal-Mart announced on CNBC that it plans to layoff and eliminate approximately 7000 back office jobs at US stores this year to operate more efficiently and effectively. These are planned by the end of January.
♦ Gas Prices Rise along with Consumer Optimism Consumer gas prices are up 11 cents/gallon in January 2017 to $2.30 per gallon according to the National Association of Convenience Stores (NACS). One would think that consumers would react negatively. However, for the 3rd month in a row, the Consumer Fuels Survey, conducted by NACS shows that the majority of fuel consumers remain optimistic. Most consumers (56%) anticipate that prices will continue to climb in the next 30 days. Jeff Lenard, VP of Strategic Initiatives for NACS says that “strong economic sentiment may help continue to push sales at convenience stores and other retail outlets.” Read more
♦ Lowe’s New Marketing Head: Exec Changes: Jocelyn Wong, former Senior VP and Chief Marketing Office, of Family Dollar is tapped to take the top marketing position, Chief Marketing Officer, at Lowe’s. She succeeds Marci Grebstein in that position. Prior to that, she worked for other retail brands including Safeway and Proctor & Gamble.
Source: Chain Store Age
♦ Fred’s promoted COO, Michael K. Bloom to chief executive effective 2/17. Bloom joined Fred’s in January of 2015 from Family Dollar. Prior to that, he held executive positions with CVS for 20 years.
♦ DO YOU KNOW why are gas prices so high in California and so cheap in South Carolina? Answer: Federal excise taxes and other gas taxes vary by state. California has the highest and SC the lowest combined taxes. Also, California has unique fuel blends, not required elsewhere. Guess what – they have to be barged in and are susceptible to outages.
Source: 2016 NACS Retail Fuels Report
Email YOUR SINGLE TENANT NET LEASE QUESTIONS to Nancy. She will answer them individually or publish the answer in an upcoming newsletter, leaving you anonymous!
Craig from Denver writes:
Nancy, "Should I consider shorter term (15 or 20 years) or longer term (25 year) amortizations for my single tenant loan?"
Craig, If the property you are buying has a long lease (15-20 years) and you plan to keep it for 5 years or less, I recommend a 25 year amortization and a 5 year balloon. This maximizes your cash flow with lower mortgage payments. Also, the interest rate on the shorter term balloon is generally slightly lower. Buyers usually opt for a 15 or 20 year amortization which is “self amortizing” if they want the loan paid for at the end of the loan term with no residual balloon. However, loan payments are higher with this sort of loan and cash flow is lower. Get out the spreadsheet and play the “what if’s” to see what works best for your situation!
♦ Family Dollar- A portfolio of three single tenant net lease Family Dollar locations sold in January for $4,695,855 at a 6.5% cap rate. Read more
♦ Dollar General - A Dollar General in Vicksburg, MS sold in December for $1,365,000 at a 7.14% cap rate with 12 yrs remaining on 15 year NNN lease with options.
♦ Family Dollar - A Family Dollar in Birmingham, AL sold in January for $1,981,132 at a 6.75% cap rate with 14+ yrs remaining on a 15 year NNN lease with options.
The information in this newsletter is deemed reliable but is not warranted. Any information important to your business should be independently confirmed in an appropriate due diligence period. All rights reserved.