All Forum Posts by: Kevin Sellers

Alex:  Most of my clients start seriously shopping for the replacement property about the time they have a PSA on the relinquished property or perhaps after the earnest money goes hard on the replacement property.  You could start making offers on replacement properties as you approach the closing date of your relinquished property.  It's best to start working with a mortgage broker or lender very early in the process.  I like to have a complete financial package assembled and ready to submit to the lender we select as soon as a PSA is signed for the replacement property.  I recently assisted a client in a large 1031x where we identified six properties, made offers on all of them and acquired three of them.

Many of my clients are selling properties that require more active management (like multifamily, SFR portfolios, etc.). They are buying NNN single tenant or NNN multitenant retail properties in TX, OK, SC, NC, GA, FL, AL, TN - the states to which the population is migrating and that have business/real estate friendly governments and lower taxes. With $4+ million in equity, you could conservatively leverage your replacement property(ies) and generate strong passive cash flow from high quality NNN assets.

Availability of financing for a single tenant restaurant depends upon the tenant and lease terms as well as location/demographics.  Loan amount will depend on these factors as well as the cap rate at which the property is trading.  Can you provide additional details?

I am a commercial mortgage broker specializing in NNN properties. Please feel free to contact me to discuss. Thank you.

Some lenders will only finance properties with investment grade tenants.  Other lenders are willing to also consider private companies and franchisees with national brand names.  The financing terms are typically better for the investment grade tenant properties.  Some lenders have certain tenants they really like and will offer special terms for properties with those tenants that have mid to long term remaining lease terms.  Lenders are kind of all over the place now and many have significantly changed their underwriting and pricing.  I maintain constant contact with the 10-12 lenders with whom I actively place debt financing on single tenant and multitenant properties.

Don't know where you are getting your financing but the loan terms are poor.  I am a commercial mortgage broker arranging financing for single tenant and multitenant properties nationwide.  My lenders are offering interest rates from 5.50% to 6.50% fixed for 5, 7 or 10 years on 25-30 year amortization schedules depending upon the tenant(s), remaining lease term(s), property location and buyer's financial strength.  Local banks will sometimes provide higher leverage but other loan terms are not competitive. The furniture store is a public company but is it rated BBB- or higher by S&P or and/or the equivalent rating by Moody's?  That makes a big difference to a lot of lenders.

For WAG and CVS properties with 10+ years remaining lease term, I have lenders at 6.00% or perhaps slightly below depending upon the demographics of the location.

Chui - Joel Owens and I have worked together many times for clients who needed financing for their acquisitions. The amount of leverage we can obtain is dependent upon the name of the tenant, length of remaining lease term, demographics of the location and the cap rate of the transaction. Financing for commercial real estate (retail, office, industrial) is different than for multifamily where we can typically get higher leverage. There have been a few rare occasions when I obtained 75% leverage for CRE transactions but even when interest rates were lower, the highest leverage was usually in the range of 70-72%. Now, with interest rates much higher, you should plan on at least 35% down and potentially more if the cap rate is < 6.00%. If you would like to discuss in more detail, I am available for a call next week. Thank you!

A revocable or irrevocable trust can hold title and be the borrowing entity.  Depending upon the property that is being purchased, the lender may require personal guarantees from the grantor and/or beneficiaries of the trust.  Residential property lenders will typically require the trust to convey the property to an individual for closing and then the property can be transferred back to the trust after closing as described above.  However, commercial lenders will not require the property to be in personal names as they typically lend to entities such as LLCs, corporations, partnerships and trusts with the support of personal guarantees from the principals.

Dollar General is a public company with investment grade bond rating.  As a result, buyers and lenders like DG properties, especially the new ones with 15-year lease term.  I have lenders that will finance any new DG regardless of market size.  Net cash flow depends on the cap rate/acquisition price, amount of leverage, amortization schedule and the interest rate that is locked at time of loan application.