Case Study: Avoiding Downtime with a Strategic 1031 Exchange

How RPS Capital Management turned a potential vacancy into guaranteed cash flow with a 15-year net lease.

CHALLENGE

The client owned a single tenant / net lease Rite Aid in Brooklyn that had one year remaining on the lease. When the tenant gave notice that they intended to vacate at the end of the lease term, the client faced the unwanted burden of carrying an empty building while a new tenant was found. It seemed likely that the client would have to add new debt to the property and / or sell the property at a reduced price. Additionally, the client was in the process of moving to Florida and becoming a resident there.

ACTION

The client called the RPS team for help. We evaluated all the pieces of the puzzle and developed a multi-faceted strategy. We determined that the client could come out ahead by selling the existing property and purchasing a net lease asset with a tenant in place. We also discovered that there were long term tax benefits to investing the sale proceeds in Florida. Ultimately, we guided the client through the process of exchanging into a newly built quickserve restaurant near Ft. Lauderdale with a long-term lease in place.

RESULT

The newly acquired asset comes with a 15-year, absolute triple net lease guaranteed by Chipotle. As a result of implementing our guidance, the client incurred several benefits including securing guaranteed cash flow for several more years, not having to add debt or find a new tenant for the existing property and incurring favorable tax treatment by moving his investment out of state.

TESTIMONIAL

“Rob and his team were incredible. They not only took a giant headache off my hands but extended my cash flow for another 15 years – in my new home state! I get a lot of pleasure driving by the property now and seeing the long line in the drive-thru lane. Thanks, Rob – job well done!” – Steven Brauser, Parkland Management