NNN Investor Secures Dollar General Right Before a Category 4 Hurricane

Dec 22, 2020 | Blog, Case Study, Triple Net - NNN or Net Net Net

Dollar General, Sulphur, LA
Closing date: August 12, 2020
Price: $1,577,000
Cap rate: 6.25%

In 2019, a CRE investor who engaged Westwood to help her use the 1031 exchange to purchase her first two triple-net (NNN) properties – a Dollar General in Georgia and a KFC in Arkansas – was ready to start the process again for her third NNN investment. In early summer of 2020, while selling two rental condos in Las Vegas, she reached out to her Westwood Net Lease Advisor and company President, Chris Schellin, for assistance.

Schellin had the benefit of working with this returning client so he knew just what she was looking for, and soon located a highly desirable Dollar General property in Louisiana. Despite numerous other offers to purchase, she won out and became the owner of the property just two weeks before Hurricane Laura made landfall in the area.

The Process – How the Client Beat Multiple Offers to Become Owner

Schellin set to work to find this repeat client her ideal NNN lease investment and very quickly located a newly listed Dollar General in Louisiana. As is common with Dollar Generals, its location garnered a lot of interest that resulted in multiple offers. Schellin’s all-cash buyer presented her offer and won the deal based on:

  • Her reliable, qualified purchasing capability and background.
  • Westwood’s history of bringing such capable and pre-qualified buyers to the table.
  • Westwood’s reputation and industry connections: the national broker who listed the property was known to Schellin.
  • The seller/developer also knew Schellin and had closed many transactions with the Westwood team in the past.

These national broker/developer relationships and Westwood’s reputation and knowledge were important factors in the client not only securing the coveted Dollar General property in her price range, but completing the 1031 exchange on time and with no transaction surprises.

Who Could’ve Predicted Just 2 Weeks Later – Hurricane Laura?

The buying and closing process was smooth, but mother nature sprang an unfortunate surprise on Louisiana just two weeks later. Schellin’s client closed on the property August 12, 2020, and the store was subsequently damaged by hurricane Laura on August 27th. The good news for this investor, as any Dollar General property investor, is that no matter what happens, the tenant operates with a corporate-guaranteed, absolute NNN lease, which means the company continues to pay rent, pay all the insurance, and is responsible for repairing the property, even if it’s demolished.

Did you know … there’s no limit to how many 1031 exchanges you can do in your lifetime?

The Result – Building a NNN Investment Portfolio with Deferred Capital Gains Tax

Since Schellin’s client was paying all cash for her latest property, he had to work within the 1031 exchange time constraints and focus on opportunities available in her price-point. With NNN lease properties in high demand, especially Dollar General stores, there was also a lack of supply. Therefore, Schellin had to act fast and use his industry relationships to beat other competing offers and secure the property for his buyer. In cases like these, Westwood’s ability to leverage its vast network to find suitable properties is imperative.

The result: this buyer met her 1031-exchange responsibilities and deferred 100% of the capital gains tax from the sale of her two high-maintenance, costly Las Vegas condos. She traded landlord responsibility, taxes, and insurance for a maintenance-free, expense-free Dollar General that operates under a long-term, corporate-guaranteed, absolute triple-net lease. It provides a cap rate of 6.60% and an annual NOI of $98,563 for the remainder of the original lease term and offers four 5-year extensions with 10% increases.

Additionally, this NNN investor diversified her real estate portfolio further by asset type and location. She now owns two dissimilar Dollar General properties in different states and a KFC fast-food property, each providing dependable income and tax advantages.

To Wrap it Up – NNN Investor Trades Costly Condo Rentals for Maintenance-free Investment & Earns $98K Annual Income

This client appreciates how the Westwood Advantage works for her – decades of expertise, national reach, industry reputation, and caring, thorough buyer representation gives her the edge when it comes to maximizing her time and capital investment. Utilizing Westwood Net Lease Advisors’ free buyer representation, she purchased her third NNN property and traded costly condo rentals for an easy $98K annual income.

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.

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