Case Study

Summary: 1031 Exchange Executed

DOWNLEG:

Property: 4.6 acre vacant lot

Cash Flow prior to Sale: None

Sale Proceeds: $6.4 million

UPLEG:

Property: Single-tenant, absolute-net-leased grocery building

Purchase Price: $11.83 million

Cash Flow after Debt Service: $415,000 annually

Average Annual Cash-on-Cash Return (5-year period): 7.0%

Client: Food Processing Owner and Operator with Real Estate Holdings

Transaction: 1031 Exchange

Granite Capital Group had previously been engaged to provide 1031 replacement property and asset management services where, through a 1031 exchange, purchased two new multifamily properties for this client. The client then had vacant land it desired to sell. The client’s investment objectives were focused on maximizing free cash flow for retirement. Further, the client sought low risk and little management. After the sale of the client’s vacant land, Granite engaged brokers, reviewed dozens of properties, and provided analyses of select replacement properties for our client’s consideration and approval. With a targeted focus on Denver, Phoenix, Salt Lake City, Seattle, and Southern California, Granite delivered assessments that included cash flow projections over 3, 5, 7 and 10-year holding periods; capital and loan structuring; prospective renovation plans to enhance the performance of the potential replacement properties; and exit strategies.

Granite and its client agreed that an absolute, triple-net leased property with a single tenant who had an excellent credit rating would best meet the client’s goal. The chosen asset provided significant and stable cash flow while diversifying the client’s growing real estate portfolio.

Services Rendered:

Accommodator selection
Sourcing replacement property
Underwriting/Analyzing properties
Property touring
Broker engagement
Letter of Intent creation
Purchase and Sale Agreement negotiation
Performance of due diligence
Debt sourcing, analysis, and recommendation
Escrow management
Cost segregation management
Asset management