Deal Analysis: 1031 NNN Investment

Population Density
Population Density

Here is a real run down of a 1031 NNN deal we did recently and the location analysis we did as part of the transaction.

Partial email to 1031 NNN investment Client:

The biggest risk of this deal is the small tenant. However, the property has solid fundamentals and the location/demographics/traffic etc is better than 90% of the 1031 NNN investment deals available nationwide. Bottomline, the tenant has low rent to sales ratio, historical occupancy and increasing store sales; I don't think they are going anywhere.

If we were to have issues with the tenant, we can put another franchisee in or better yet we could put in a (omitted) or (omitted) (both of which do not have locations nearby and demographics are ideal).

A stronger operator on a 15 year lease would make the cap rate go down and push the value up. If a new tenant paid the same rent, a 6.5% cap rate sale would put the value at (omitted). If we could get a new stronger tenant to pay (omitted) (7.5% on (omitted) sales) we could sell for (omitted). With this said, we would almost want the tenant gone and you could make some serious profit.

I found a sold comp just north of the subject property that is similar to this property. See attached list of recent sales; property #4 sold for (omitted) for half an acre and vacant (omitted) sf building. Using that sale as a value comp, your property already has profit built in.

Digging In… 1031 NNN data points.

Below are some date points I gathered on this 1031 NNN investment deal to help my client make the best decision.

  • Lease Comps for immediate market: $18 to $33 psf. Your property is at bottom end of market at $19 psf
  • Retail Trade Area Supply and Demand: the market is undersupplied in many segments. *5 minute drive time Food and Drink Category- under supplied by $6.5M *10 minute drive time Full Service Restaurants Category- under supplied by $18.8M
  • Crime Data - mid-range; similar to a lot of metro high population areas
  • Population Density- mid to high. There are a lot of apartment complexes nearby
  • Demographics: *5 minute drive: 70,000 people *10 min drive: 265,000 people *15 min drive: 539,000 people *population and incomes are growing in all drive times (see attached with highlights)
  • traffic counts: 40,000 daily cars in front of property and the surrounding intersections. Most Walgreens only have 25k to 30k daily cars.

Supporting Images

Traffic Counts
Traffic Counts
Population Density
Population Density
Retail Marketplace Profile
Retail Marketplace Profile
10 minute drive Demographics
10 minute drive Demographics
Crime Map
Crime Map

For info like this on your next 1031 NNN investment give Thomas a ring at 1-866-539-1777 or email here.

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