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Home » Blog » Case Study: How NNN Seller Overcame COVID-19 Market Challenges to Make Deal on Burger King

Case Study: How NNN Seller Overcame COVID-19 Market Challenges to Make Deal on Burger King

Sold Burger King, Belton, TX

Closing date: May 8, 2020
Price 2,263,000
Cap 5.87%

Seller of NNN Burger King Overcame COVID Market Obstacles to Close Deal

In January 2020, a long-standing client of Westwood Net Lease Advisors decided it was time to sell a Burger King in Belton, Texas. Chris Schellin, President and Buyer’s Advisor had been in regular contact with this client about diversifying his property investments, and the time was right.

Schellin listed the Burger King absolute triple-net (NNN) lease property and sent word to his vast network that it was available; soon it was under contract. However, a rather large COVID-19 issue arose during the transaction that could’ve derailed the entire deal. Schellin quickly worked to overcome the obstacle and provided a win-win solution for both the seller and the buyer.

analyzing retail trends

The Process & COVID Market Unpredictability

Schellin and his client had been in regular contact about diversifying his portfolio. They decided together in January, before COVID hit the U.S., that the Burger King in Texas was one of many fast-food properties he would sell and then use the 1031 exchange to purchase different asset types.

Once the client decided to list the Burger King property, Schellin reached out personally to his extensive network of contacts and used his industry-specific database to send the listing to hundreds of thousands of people. Right away, Schellin was contacted by a broker in California whose client was looking for a NNN lease property, also in a 1031-exchange. Negotiations began and the contract was signed just as COVID began shutting down the market.

While the property was under contract, the tenant had a sudden request that threw a wrench into the works and threatened to halt the entire process. If the situation weren’t remedied quickly, the client would be back to square one, relisting the property, and the 1031 buyer in California might miss the IRS’s 1031 timeline, losing a significant amount of money to capital gains tax.

The Request that Threatened the Transaction

As the government began temporarily closing non-essential businesses and consumers began to quarantine at home, fast-food restaurants had a drop in sales like never before. This Burger King tenant was at the mercy of the shut-down and needed rent abatement to see him through the pandemic.

Wanting to help the tenant, the seller, and the buyer, Schellin had to discover a way for the buyer to feel comfortable with rent abatement and ensure that his client would get his rental income back after the new owner took over the property, as repayment would be many months later.

After negotiating with the tenant on a solution that would work for him, they drew up a lease amendment and a sale contract amendment. These amendments allowed rent abatement, or free rent, for April and May, and a rent reduction until September, when the tenant would then start to repay the missed and reduced rent payments over four months, ending in December. The two missed payments from April and May would be paid to the seller by the new owner at closing.

With all in agreement, the client sold his Burger King May 8, 2020, and the new buyer, who was utilizing a 1031 exchange, closed on the property within the mandated 180-day timeline.

real estate brokers

The Result: Both Seller & Buyer Find Investment Success

In this uncharted pandemic situation, buying and selling commercial investment properties comes with a unique set of requests and challenges; none that can’t be solved with all parties working together. In this case, Schellin’s client was willing to work with the tenant and buyer to make the sale a possibility.

As an advisor, Schellin’s experience and network of resources played a crucial role in not only selling the Burger King property swiftly, but also overcoming the rent issue, satisfying the IRS’s 1031 timeline for the buyer, and keeping the transaction profitable for all concerned.

The buyer of the Burger King now has a long-term absolute NNN lease investment with a corporate-guaranteed lease. And, immediately after closing, Schellin’s client utilized the 1031 exchange to purchase an off-market Dollar General in a heavily populated Pennsylvania town with a fifteen-year, absolute NNN lease, and long-term guaranteed income.

To Wrap it Up – COVID Market Issues Can be Overcome for Successful NNN Investing

Westwood Net Lease Advisors are watching the market carefully during COVID-19 and helping clients like Schellin’s invest in essential retail and other NNN lease properties that are providing worry-free, long-term investment opportunities, and stable monthly income.

In the last few months, Westwood Advisors have helped many clients close on properties that may have otherwise fallen through due to lending or other complications, and remain in daily contact with lenders, attorneys, and other industry professionals while continuing to evaluate NNN developments.

For more NNN investment information and a free, no-obligation consultation, call or email Chris Schellin, President of Westwood Net Lease Advisors, at 314-563-2208.

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Tags: COVID-19, COVID-19 NNN, fast-food NNN investment