Ownership: A widow with a typical stocks and bonds portfolio managed by a stockbroker also owned a fast food triple net leased property in Colorado. The property had been owned for over 20 years and was the only real estate owned by the estate other than the family home.
Issue: The estate received notice that the tenant would be leaving at the end of its lease term. The stockbroker recommended selling the vacant property and investing the proceeds in a bond. After researching the market it was concluded that the property would net approximately $350,000, if sold. No consideration had been given to selling the property with 3 or 5 years remaining on the lease. Had the property been sold with a lease in place, significantly larger net revenue would have been received. As land value it was a development opportunity.
Recommendation: After researching the market it was believed that the location was sound, not great, but if a new tenant could be located the site should be redeveloped. This would return a higher net income than the after tax benefit of a bond. A real estate broker was hired with a six month listing agreement. After that period, the decision would be revisited.
Result: Within four months, Washington Mutual (JPMorgan Chase) signed a ten year triple net lease. The owner had to contribute $100,000 for the reconstruction to Washington Mutual who built a completely new branch building. In turn, they agreed to pay $64,000 per year triple net for a 14.4% return on $450,000 ($350,000 plus $100,000). The property would currently sell for approximately $720,000.
Conclusion: The estate continues to own the property and is pleased with their choice to release the property.
Services Provided: Haskell Properties provided consulting services for a discretionary fee.
Issue: The estate received notice that the tenant would be leaving at the end of its lease term. The stockbroker recommended selling the vacant property and investing the proceeds in a bond. After researching the market it was concluded that the property would net approximately $350,000, if sold. No consideration had been given to selling the property with 3 or 5 years remaining on the lease. Had the property been sold with a lease in place, significantly larger net revenue would have been received. As land value it was a development opportunity.
Recommendation: After researching the market it was believed that the location was sound, not great, but if a new tenant could be located the site should be redeveloped. This would return a higher net income than the after tax benefit of a bond. A real estate broker was hired with a six month listing agreement. After that period, the decision would be revisited.
Result: Within four months, Washington Mutual (JPMorgan Chase) signed a ten year triple net lease. The owner had to contribute $100,000 for the reconstruction to Washington Mutual who built a completely new branch building. In turn, they agreed to pay $64,000 per year triple net for a 14.4% return on $450,000 ($350,000 plus $100,000). The property would currently sell for approximately $720,000.
Conclusion: The estate continues to own the property and is pleased with their choice to release the property.
Services Provided: Haskell Properties provided consulting services for a discretionary fee.