TOPIC: Triple 1031 Exchange - Disposition & Acquisition
PERSPECTIVES: Portfolio Upgrades
PROPERTIES: Sold: Farm, DG - Hays, NC & AAP - Doraville, GA; Purchased: DG - Channahon, IL & ORLY -
A repeat client, that owned multiple investment properties, was looking to reallocate and
simplify their real estate portfolio. They were able to take advantage of the strong market
conditions and sold two net-lease properties, one of which we helped them acquire in
2013, and one farmland property they owned with 4 other partners. With the proceeds
from the three sales, they wanted to complete a 1031 exchange into 2 properties that had
longer lease term remaining, strong demographics and traffic counts, and they were the
sole owner and decision maker.
Our client’s goal was to dissolve a 4-person partnership in order to simplify their affairs.
The farmland that was owned by the partnership was going to net our client around $500K.
They knew that would be a difficult price point to satisfy their 1031 exchange and provide a
strong, passive investment with long lease term, so they decided to sell 2 additional
properties. We helped coordinate the timing of the 3 separate sales, as well as ensure their
total net would allow them to end with an upgraded investment portfolio while also
satisfying their 1031 exchange.
Our client’s strategy for their 1031 exchange was to combine $4.2M in cash from their 3
sales and invest in 1-2 high quality properties. For tax purposes, they initially wanted to
purchase in states where they already owned properties. However, the strategy began to
change due to historically low cap rates and available inventory. We had to adjust and
expand our search efforts in order to find strong credit tenants, in a dense area, with long
lease term remaining that met our client's return expectations.
We created “The Property Profiler” and conducted a thorough broadcast, leveraging our
current database of potential buyers and prospects. With pricing and marketing
aggressively, we were able to locate all-cash, quick close buyers at strong market rates for
their Dollar General and Advance Auto Parts properties.
We created “The Purchaser Profiler” and conducted an aggressive search leveraging our
database of developers and brokers on a national and regional level to uncover any “off”
and “on” market opportunities. We also leveraged our database of properties to create a
“Locate List” for our client to easily see what properties were currently available. This
helped us quickly confirm search criteria and zero in on the right properties. We
communicated and qualified effectively, while moving aggressively and persistently
towards finding three properties to identify on two back-to-back 1031 exchanges. One for
$2.4M and another for $1.8M.
After strategizing and confirming our client’s disposition and acquisition plans, we agreed
to implement a solution with a specialized team approach. We aggressively broadcasted
the Dollar General and Advance Auto Parts properties, and after a few months on the
market we found qualified and motivated purchasers. We navigated and managed the due
diligence process, third party consultants, and seller expectations while closing the Dollar
General property with 7.28 years of lease term remaining and 6.35 years remaining on the
Advance Auto Parts property.
Our client identified three 1031 properties within the first 45 day ID period and closed on
an O’Reilly Auto Parts property with 18.58 years of lease term remaining. Then, they
identified three additional properties and closed on a Dollar General property with 14.74
years of lease term. Both properties were closed in 37 to 85 days, which saved a potential
capital gain event and got their equity back to work as soon as possible.
Throughout these transactions we maintained a high touch relationship and stayed in tune
with the goals and concerns of our client. We helped them stay focused and confident to overcome hurdles during the disposition and acquisition which translated into a better long-term investment and piece of mind. By taking the time to listen, confirm goals, strategize, and utilize our process throughout each transaction, an extremely efficient and satisfying experience was had by all parties. Objectives were met, time was saved, and returns on investment were achieved.