Dollar General, Garrison, ND
October 28, 2020
6.95% cap rate
A Nevada-based doctor, the owner of several residential rentals, was ready to sell another of these hands-on, costly properties and use a 1031 exchange to purchase her second, hassle-free NNN property.
Having previously worked with Buyer’s Advisor Mike Kocur at Westwood Net Lease Advisors to purchase her first Dollar General, she realized the importance of personal representation when her bank loan was canceled due to Covid, nearly costing her the deal. Thanks to Kocur’s knowledge and network, she was able to close on the Texas Dollar General, earn roughly $80k per year from that investment, and have the confidence to move forward purchasing another.
When it came time for her next NNN investment, she reached out to Kocur, whose understanding of how banks were adjusting to the new way of doing business and the ability to overcome market challenges, helped his Nevada buyer purchase a brand-new Dollar General in North Dakota, and:
- Secure a low-interest commercial mortgage.
- Negotiate a lower sale price (from $1,356,580 to $1,327,295).
- Get a higher than advertised cap rate of 6.95% (up from 6.80%).
- Meet the strict 1031 timeline.
But how did Kocur’s buyer secure this Dollar General in the tightest NNN market in decades, secure financing in the unpredictable economic climate, and get it below the asking price?
The Challenges – Find a NNN Property in an Exceptionally Tight Market & Secure Financing in an Unpredictable Time
Kocur knew the biggest challenge for his client would be finding an absolute triple-net lease Dollar General in an exceptionally tight market. The second challenge would be securing financing in the unpredictable pandemic market, and lastly, to get her within her budget, all while having it come together in the 180-day, 1031 timeframe.
Challenge 1: Find a NNN Dollar General in an Extremely Tight Market
To solve challenge number one, Kocur contacted his vast network of brokers, developers, and sellers to locate available properties and found a brand new Dollar General in Garrison, North Dakota.
This Dollar General, which was built late in 2019, would provide 100% income stability with zero landlord responsibilities for the lease term of 14.25 years, plus five 5-year lease renewal extensions. It could give his client close to 40 years of escalating, guaranteed income. They had to act fast if she were to identify, in writing, intent to purchase to the IRS in 45 days, and obtain an accepted offer on the property before anyone else.
Challenge 2: Secure Financing in an Unpredictable Pandemic Economy
Simultaneously, Kocur sourced the mortgage company, one he knew traditionally lent for high-quality NNNs, and would give his client a fair shot at a commercial mortgage, even during the pandemic. In the end, due to the high-credit tenant, she was offered financing with an historically low interest rate, providing over 400 points of leverage.
Challenge 3: Purchase Dollar General in Competitive Market Below Asking Price
When a buyer is represented by Westwood, we are well known in the marketplace and our advisors perform all necessary upfront work before an offer is ever made, our transactions carry weight in the industry. Our buyers’ offers are quite often the only ones entertained by sellers because our close rate is exceedingly high, even when it comes to the time constraints of a 1031 exchange.
As in this case, the Westwood Buying Advantage will usually prevail, even when an offer is made at a below-asking price. Our entire team works closely with all parties to identify any issues upfront, help avoid mistakes, free up time, and provide peace of mind that the investment is sound.
Kocur, known to the seller, worked to secure the best deal for his client, meeting her financial and lifestyle goals, and satisfying the 1031 requirements.
The Result – Investor Unloads Hands-On Residential Property for Worry-Free, NNN Dollar General, Earns $92k/Year
This fairly new NNN investor sold a residential rental and engaged Kocur for a second time as she knew his representation would help her purchase exactly what she was looking for and help her work through any unforeseen issues. This Dollar General exceeded her expectations in every way, including the ability to be financed at a 3.00% interest rate, creating leverage she’d never had with her residential rentals.
The result: this NNN investor added another worry-free, income-producing DG property to her portfolio with a healthy cap rate to interest rate spread, $92,247 in annual NOI, and the potential for 40 years of guaranteed, escalating income. She also deferred, possibly indefinitely, 100% of the capital gains tax from the sale of her residential rental.
To Wrap it Up – NNN Investor Engages Kocur a Second Time to Overcome Pandemic-Era CRE Investing Challenges
Utilizing Kocur’s net-lease investment and 1031 expertise, this Nevada investor was able to trade up from a residential rental to a reliable Dollar General property, defer all capital gains tax, and exceed her financial and lifestyle goals. She now has a stable, maintenance-free addition to her CRE portfolio and reaps the rewards of truly passive monthly income for decades to come.
If you are interested in learning more about NNN lease investments or would like to use the 1031 exchange to trade an underperforming property for one that offers nothing but benefits, contact Mike Kocur today, 314.584.9857. He offers a free, no-obligation consultation and no-cost buyer representation.