In today’s investment landscape, where stock markets swing wildly and interest rates have plateaued at new highs, sophisticated investors are increasingly turning to alternative strategies for wealth preservation. In this case study we’ll reveal how a successful pediatrician approaching retirement leveraged a 1031 exchange to transform the equity from his medical office building into a steady income stream through a Freddy’s Frozen Custard & Steakburgers (Freddy’s Steakburgers) ground lease in North Las Vegas.
Unlike traditional real estate investments that demand active management, triple net lease properties offer immediate cash flow from day one—in this client’s case, even before construction began—while mitigating risks through innovative escrow arrangements. For high-net-worth individuals seeking refuge from market turbulence and hands-off income stability in the “new normal” economy of 2025, this strategic investment approach demonstrates why NNN leases have become the preferred wealth preservation vehicle among professionals transitioning from active business ownership to passive income generation.
About the Property & Tenant
Our client, like you, discovered our team here at Westwood Net Lease through our website and our client success stories. Our client for this particular deal was a successful pediatrician in the Las Vegas area. He came to Westwood looking to reinvest funds through a 1031 exchange after selling his office building.
After conducting in-depth research and thorough due diligence process, our team identified a future Freddy’s Steakburgers in North Las Vegas as the perfect property for our client. Not only did this quick-service restaurant (QSR) represent a national brand with strong growth potential, but it is also located in a fast-growing area of North Las Vegas.
One unique aspect of this property specifically is that it was structured as a ground lease rather than a traditional fee simple acquisition that would include both land and building. Our buyer had previously depreciated the medical building he had just sold, which meant he didn’t have enough tax basis left to benefit from further depreciation. This made a ground lease structure for this particular NNN lease particularly advantageous, as the depreciation benefits did not factor into his investment decision.
Key features of this property:
- Structured as a ground lease, which allowed our buyer to enter at a lower price point.
- The property was not yet constructed and thus added additional risk in our underwriting.
- The seller agreed to pay rent to our client (the buyer) as if the tenant were in place until the building was completed in September 2025. This minimized the risk to our buyer.
- We advised our client to have the seller hold a percentage of construction funds in escrow to cover infrastructure costs. This ensured our buyer was protected if the seller
- defaulted or failed to complete the Landlord’s improvements under the lease.
Unlike traditional triple net lease properties where the investor purchases both land and building, a ground lease structure means that our buyer, the investor, was purchasing only the land. At the time of purchase, construction had not yet begun on the property, with completion projected for late September 2025. This left the tenant responsible for constructing, improving, and maintaining the building on the land. This arrangement offered our client a lower entry price point while maintaining the benefits of a national tenant with a long-term lease.
The Market Advantage
The North Las Vegas market presented this client a rare opportunity for investment in a growing metropolitan area that also happened to be in his backyard. Properties in the $2.5 million price range with national QSR tenants are uncommon in the Las Vegas MSA (Metropolitan Statistical Area). However, our astute team of advisors was able to source and navigate this unique opportunity for our client.
The market positioning of NNN lease properties differs significantly from other real estate sectors (such as apartment rentals). Unlike multi-family apartments or office buildings that follow regional trends, we evaluate NNN lease opportunities on a case-by-case basis. Based on our thorough evaluation, our team determined that this Las Vegas property offered our client a strategic advantage because it provided a lower price point for a new QSR property in a market with strong growth potential.
In contrast, West Coast markets generally present challenges for NNN investors, with limited new development at higher price points and lower cap rates. This leads to a common pattern where investors living on the West Coast often purchase properties in the Midwest or Southeast where they can secure better returns on similar investments. As Chris Schellin, President of Westwood Net Lease Advisors, explained, in places like California, “You typically pay more for a property with a lower rate of return and may not see a large amounts of appreciation given a defined long term income stream” ”
The Numbers
Our client acquired this ground lease at a market cap rate, especially for Las Vegas that was acceptable to the buyer while offering a more accessible price point than if he had wanted to purchase a comparable property with both land and buildings. Including the building in his property search would have added another $1-2 million dollars to the purchase price.
In the unique agreement we negotiated for our client, the seller, through escrow, agreed to pay rent as if the tenant was in place until the building was complete. This arrangement assured our client would receive immediate cash flow from day one of his ownership, rather than having the buyer’s funds sitting idle in a 1031 exchange account or waiting until September to receive rental income from the new tenant.
The Journey to Purchase
The journey began when a pediatric doctor who owned an office building for his practice sold that property and approached Westwood through their website with a 1031 exchange requirement. Our team of experts works with 1031 exchanges on a regular basis. We worked closely with our client to complete this purchase within the designated 1031 time window that allows investors 45-days to identify and a total 180-day period to complete the exchange.
Our team worked closely with the buyer to evaluate various properties and their associated pros and cons, ultimately finding a suitable property in the buyer’s “backyard” of Las Vegas, making it an especially attractive option.
The traditional approach would have been to wait for the property to open for business before closing. However, this buyer prioritized beginning cash flow as soon as possible. This led to negotiations with the seller to close early, even before construction started, with the agreement that the seller would pay rent until the building was complete.
To mitigate the risks surrounding construction, in our deal we negotiated having the seller place funds in escrow sufficient to cover the cost of all site preparation and infrastructure items. The title company would hold these funds in escrow until the work was complete. This meant our buyer was protected even if the seller failed to complete the agreed-upon work.
Why This Deal Worked
This deal represented a perfect alignment of buyer needs and market opportunity. The buyer had depreciated the property he sold for quite some time and didn’t have enough tax basis left to benefit from further depreciation. Therefore, purchasing a ground lease didn’t result in losing depreciation benefits he couldn’t claim anyway. The buyer’s primary concern was finding the best possible tenant location in a growing part of North Las Vegas with a national brand.
The innovative structure of this purchase allowed our client to begin earning returns immediately while lessening his risks through escrow arrangements.
Most importantly, our expert team was there throughout the whole process to identify and mitigate risks. Each deal has its own associated risk factors, and as Chris Schellin pointed out, “It’s our job to point out not only the positives, but the glaring negatives that he or she may not be aware of, just from reading a brochure.” This expertise is particularly valuable because most investors have their own businesses to run and aren’t familiar with the details of triple net leases.
Bigger Picture: Today’s NNN Investment Landscape
The current economic environment has created distinct concerns and opportunities for NNN lease investors. Recent years have seen investors concerned primarily about interest rates and refinancing options. However, there’s a growing recognition that the market has reached a plateau and, as Schellin observed, “I don’t foresee us going back to 3.5% interest rates, so this is the new normal.”
This acceptance of the new normal is pushing investors who have been on the sidelines back into the NNN lease market, especially as they observe volatility in other investment pathways, like the stock market. Many investors are ready to trade the volatility of potential higher returns for the stability and predictability of NNN leases.
This reliability is particularly appealing to a certain investor profile. “Most buyers are looking for the same thing. They’re coming from apartments or office buildings where it’s been a lot of headache and stress,” Schellin explained. “These investors have already built their wealth and are now focused on preservation rather than growth. For them, a NNN lease property provides peace of mind compared to actively managing properties or dealing with stock market volatility.”
This is especially relevant for investors approaching or in retirement, who want predictable income. The stability of NNN lease investments, particularly with national tenants like Freddy’s Steakburgers, continues to make NNN lease an attractive option for wealth preservation and reliable income generation in today’s economic climate.
What’s next?
You’re ready for stable, predictable income month-over-month. Step away from the volatility of the stock market and work with our team
The reality of stable assets that provide you and your family with the life you worked so hard to achieve is just a phone call away. Contact us today: 314-997-5227 for a no-obligation conversation.
