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1031 Exchanges Remain Great Investor Strategy                                                             By Nancy Miller, CCIM 

The IRS 1031 exchange is used by many investors to defer, not eliminate capital gains on their investment properties. It remains a great strategy for first time and repeat investors, but must be employed correctly.

First time investors of qualified “like kind” assets (land, building, timber, or other non-primary residence) that has a very low basis are ideal candidates. Here are two examples:

#1 Mike and his family sold a small commercial building in Manhattan that has been in the family since the early 1900’s to a developer who offered them well over $10M. Their “basis” or original cost plus capital expenses was around $500K. In order to defer the long term capital gains, they decided to use the IRS 1031 exchange strategy and purchased several NNN investment properties equal to the sale of the building. The gain is rolled into the new investments until a later time.

#2 Another buyer, Ernie in Detroit owned a NNN leased Aarons Rents in Georgia. Bull Realty listed and sold the net lease property for him. Since he originally acquired the Aaron’s as part of a 1031 exchange, he wanted to roll the appreciation into another investment property. We identified and he purchased a new construction Family Dollar in Louisiana. Again, he deferred, but did not eliminate the gain.

There are many “do’s” and “don’ts” to comply with the regulations of 1031 exchanges that are very specific. Investors are always advised to contact their tax advisor or a 1031 intermediary, especially PRIOR to the sale of the “relinquished” property or they will be disqualified from the start. 

Industry Soundbites

Starbucks' Answer to Trump Ban: Hire 10,000 Refugees

QSR's Starbucks' Answer to Trump Ban: Hire 10,000 Refugees Starbucks CEO Howard Schultz sent a letter on Sunday to all employees addressing the recent executive order signed by President Trump that bans refugees from certain countries from entering the U.S.

Wal-Mart announced on CNBC that it plans to layoff and eliminate approximately 7000 back office jobs at US stores this year to operate more efficiently and effectively. These are planned by the end of January.

Gas Prices Rise along with Consumer Optimism Consumer gas prices are up 11 cents/gallon in January 2017 to $2.30 per gallon according to the National Association of Convenience Stores (NACS). One would think that consumers would react negatively. However, for the 3rd month in a row, the Consumer Fuels Survey, conducted by NACS shows that the majority of fuel consumers remain optimistic. Most consumers (56%) anticipate that prices will continue to climb in the next 30 days. Jeff Lenard, VP of Strategic Initiatives for NACS says that “strong economic sentiment may help continue to push sales at convenience stores and other retail outlets.” Read more

Lowe’s New Marketing Head: Exec Changes: Jocelyn Wong, former Senior VP and Chief Marketing Office, of Family Dollar is tapped to take the top marketing position, Chief Marketing Officer, at Lowe’s. She succeeds Marci Grebstein in that position. Prior to that, she worked for other retail brands including Safeway and Proctor & Gamble. Source: Chain Store Age

Fred’s promoted COO, Michael K. Bloom to chief executive effective 2/17. Bloom joined Fred’s in January of 2015 from Family Dollar. Prior to that, he held executive positions with CVS for 20 years.

DO YOU KNOW why are gas prices so high in California and so cheap in South Carolina? Answer: Federal excise taxes and other gas taxes vary by state. California has the highest and SC the lowest combined taxes. Also, California has unique fuel blends, not required elsewhere. Guess what – they have to be barged in and are susceptible to outages. Source: 2016 NACS Retail Fuels Report

           

150

Family Dollar Net Lease Investment | 6% cap rate

100 Patriot Lane, Summerville, SC 29486

Bull Realty is pleased to offer this new construction NNN leased Family Dollar in a rapidly growing part of the Charleston, SC MSA. The store is strategically located three miles from Interstate 26 and near US Hwy 176 in Summerville, SC. The store, due for completion in July 2017, will have a 15-year NNN lease with six 5-year options, guaranteed by Family Dollar, a subsidiary of Dollar Tree.

-  New construction Family Dollar, scheduled for July 2017 construction

-  15-year absolute NNN lease with six 5-year options

-  Rare 10% rent increase in year 11 and in each option period

-  Nearby traffic counts average 28,800 vehicles per day

- 5-mile population exceeds 89K

- Extraordinary population growth of 76% since 2000

- Located in Charleston MSA with major influx of national employees to area

-Built by top Family Dollar developer

Call 404-876-1640 

 

On The Radio

Nancy Miller, President of the National Net Lease Investment Group, Bull Realty, Inc. and Scott Lindstrom, Director of Real Estate and Development with Garrard Group joined Michael in Studio One to share some single tenant property investment tips .

You're invited to contact us at 404-876-1640 if we might be of service in any way.