Wendy’s, Richmond, VA
Closing date: August 12, 2020
Cap rate: 6.20%
A long-standing Westwood Net Lease Advisors’ client who owns many fast-food QSRs contacted Chris Schellin, President of Westwood, to help him sell a Wendy’s triple-net (NNN) property in Richmond, Virginia. The client decided he was going to sell this property, one that Schellin had originally helped him purchase several years prior, to begin diversifying his CRE portfolio with different asset types.
With eleven years left on the lease and amid the COVID pandemic, Schellin sold the property and closed the transaction in a mere 25 days.
The Process – The Advantage of Recent Due Diligence & Collaboration
With so many years left on the Wendy’s lease held by a 15-unit franchisee, this NNN investment was a great opportunity for any buyer. Schellin tapped into his vast database of brokers and buyers to let them know the property was for sale, and in one day, accepted an offer directly from a buyer who was on the last day of his 1031 exchange identification period.
Once the interested 1031 buyer made the offer, though Schellin didn’t represent him, he collaborated with the buyer and helped facilitate the due-diligence process since Schellin had in-depth knowledge of the property from the transaction just a few years before.
Typically, during the due diligence period, which usually lasts 21–30 days after the property is under contract, there is an investigation to corroborate that the property and lease are exactly as advertised, there are no environmental or survey concerns or any hidden surprises.
The information disclosed by the due-diligence review – tenant financials, lease review, title review and easement details, Phase 1 environmental report, and as-built survey – is typically used to confirm that the property can go to closing with the original terms. If the review reveals any discrepancies, it can be used to exit from the deal without risking the earnest money deposit.
In this case, since due diligence had been performed fairly recently and Schellin had all the paperwork already, it was a much faster process. So fast, in fact, that the transaction closed in 25 days!
The Result – Seller Sold at Top Dollar & Buyer Met 1031 Timeline in 25 Days
As soon as the property was available, the 1031-exchange buyer made a solid offer that was accepted. He was thrilled to invest in a reliable Wendy’s property in a prime location. With this NNN purchase, he fulfilled his 1031 exchange identification requirement on the last day and closed well under the 180-day deadline – from start to finish in just 25 days.
As a result of Schellin’s experience, network, and willingness to collaborate, the Wendy’s property sold at top dollar during COVID with no obstacles, providing a hefty profit to the seller.
To Wrap it Up – Westwood Client Sells Wendy’s & Defers Capital Gains Tax
As this regular client knows, when it comes to NNN lease investing, it pays to engage a Westwood Advisor, whether buying, selling, or using a 1031 to trade up. With expert representation, the entire process can be much faster and smoother, saving time and money, and preserving capital.