What does it mean to be a true buyers’ advisor?

Mar 19, 2024

​​We here at Westwood Net Lease Advisors stand out from other NNN lease advisors. How? We typically represent the buyer. So much so that, when it’s in the best interest of our client, we recommend they not buy. We’ll walk you through a case study where we did just that: We acted in the best interest of our client and recommended they not purchase a property and instead wait for a better fit property.

The Client

Our team identified a dental property in a high-end neighborhood of Chicago property that aligned perfectly with the client’s goals of a 7% return. The property itself was backed by a 90 unit operator. Our team had sourced a mortgage broker in the 6.25% range. The economics were aligning perfectly, and so our client submitted an LOI (a Letter of Intent) for this particular property.

The Process

Before our client signed on the dotted lines we were doing our diligence as buyers’ advisors. We closely inspected the lease, the tenant’s financials, and local real estate taxes.

Upon this closer inspection we determined, along with the Buyer’s attorney:

  • County tax records showed a very low assessed value
  • Cook County has extremely high real estate taxes in general
  • For this particular property:
    • The lease accounted for a fixed CAM Payment (property maintenance, taxes and insurance) *
    • It was determined the seller was making an extra $15k per year because their expenses were less than what the tenant was paying. Normally, this needs to be reconciled, if
    • the tenant overpays, the landlord owes them money. The tenant pays taxes regardless of the amount, however, this lease called for a fixed cap on CAM payments

Challenges

Our client initially decided to move forward with the purchase. However, we learned from research that the taxes were set to reassess next year (2025). As a result, taxes were going to go up enough that the $15,000 cushion would be wiped out. In fact the buyer would assume “slippage” starting in 2025 given the new tax bill would more than double.

Without our team’s due diligence, the buyer would face a huge tax bill in the following year. While a property tax increase was not guaranteed, this specific property was too much of a risk. Everything checked out in the short run, but we knew this wouldn’t be the best, prudent choice for our client.

The Result

We punted the deal. The buyer felt good about it. We felt good about it.

Our client is in the same if not a better position on the next deal, because we punted this one.

The benefits of working with Westwood Net Lease, your NNN advisors

NNN lease investing is not a get rich quick scheme. It is a relatively low risk, stable income when compared to other investment avenues.

We are true advisors in every sense of the word. We are your advocates and Buyers use us because we uncover items that other buyers may overlook.

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