Hardees, St. Petersburg, FL
Closing date: July 15, 2020
Cap rate: 6.50%
Bidding Situation Escalates Final Sale Price
A long-standing client of ten years reached out to Chris Schellin, President at Westwood Net Lease Advisors, to list the Hardees in Florida that he previously purchased with Schellin’s help in 2011. With ten years left on the lease, the client wanted to use a 1031 exchange to trade up to a property with a longer-term lease and a higher-grade tenant.
Schellin listed the property, and due to Westwood’s extensive network of buyers, brokers, and triple-net (NNN) property owners, the seller received 13 offers within a 72-hour period, four above list price. Once the seller chose a buyer from the bidding situation and overcame an environmental concern and a COVID obstacle, the transaction closed $82k above list price and within the required 1031 exchange timeline.
Read more to learn which buyer Schellin’s client chose to sell to and why, the many ways in which NNN lease property investments can be affected by circumstances out of your control, and how engaging a Westwood Net Lease Advisor promotes a timely, successful transaction for both parties.
13 Offers to Buy the Property in 72 Hours – How to Choose?
Once Schellin put the word out to his vast network that this Hardee’s was for sale, thirteen offers came flooding in within 72 hours. Fielding multiple offers was a good problem to have, however, it was imperative to sell to the right buyer to maximize time and profits. Therefore, Schellin spent four days qualifying each buyer’s broker to validate experience and credibility, and ensuring the buyers understood the value of the asset and had the ability to close.
This attention to detail resulted in selling to an experienced, financially sound Florida-based buyer who paid substantially over list price – he understood the immense value of this hard-corner property at a busy intersection. It was listed at $1,828,000 and sold for $1,910,000.
With the offer accepted and the sales process underway, the deal was suddenly interrupted by two obstacles that had to be overcome in order for the sale to close, and do so within the tight 1031 exchange timeline.
NNN Transaction Obstacles: Phase 1 & Phase 2 & COVID-19
As the buyer performed due diligence, he discovered the Phase 1 environmental report mentioned potential concerns. It was the seller’s responsibility to prove there was no issue with the land, so Schellin acted fast to locate a reputable engineering firm to perform a Phase 2, which involves digging up soil and water samples to look for ground contamination. The Phase 2 analysis came back clean.
Obstacle number one was solved. Then COVID-19 started to take its toll on fast-food restaurants. Since the buyer contracted the property at the very beginning of the pandemic, he had no way of knowing what was to come.
- About one month into the deal, Hardee’s decided to stop paying rent on all their locations for three months.
- To keep the sale moving, Schellin’s client obtained a written guarantee that Hardee’s would start paying rent again July 1, 2020.
- Schellin then helped the seller negotiate a rent-payback for himself of the rent missed between April and July, with payback starting January 2021 and continuing until he is made whole.
Since the buyer would not close on the property until Hardee’s started paying rent again in July, once that rent payment was confirmed, the deal closed as soon as possible on July 15, 2020.
A Prime Location – The Secret to an Excellent NNN Investment
Just as this Hardee’s proves, high-quality real estate in a prime location is the secret to an excellent NNN investment. A prime location is a high-density area with good exposure near other consumer staples along a major retail artery with high traffic counts. This property also had the added bonus of being a hard-corner lot, which is ripe for development or could be easily re-tenanted should the current tenant vacate.
When such a desirable NNN lease property goes on the market, often several buyers will bid to buy the property. This is when it is important to your financial future to engage an experienced Westwood Net Lease Advisor to represent your best interests.
To Wrap it Up – Seller Earns $82,000 Over Asking Price & Meets 1031 Deadline
Due to this recurrent advisor relationship and Schellin’s expertise, this client sold his property fast, kept on the 1031 timeline despite obstacles, and earned an extra $82,000 over asking price, which he invested into another property, deferring all capital gains tax in a 1031 exchange.
If you’d like to learn more about the 1031 exchange and all the benefits of NNN investing, call or email Chris Schellin, President of Westwood Net Lease Advisors, for a free, no-obligation consultation, 314-563-2208.