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Wolfe Pack Retail Sales Update | August 2019

August retail sales grew 4.6% year-over-year (unadjusted), and up by 0.4% month-over-month, excluding automobile dealers, gasoline stations and restaurants. 

As of August, the three-month moving average was up 4.1% year-over-year versus 3.5% in July. 

While retail trends continue looking good, tariff talks are having an impact.

“While consumer attitudes about the economy indicate some retreating optimism, the bottom line is that consumer spending remained resilient in August and continued to be a key contributor to U.S. economic growth,” NRF Chief Economist Jack Kleinhenz said. “Trends remain strong, but August grew somewhat slower than July, which could reflect consumers’ concerns about the unpredictability of trade policy. It is too early to assess the impact of the new tariffs that took effect at the beginning of this month, but they do present downside risks to household spending.”’

YOY August Winners (in descending order):

  • Grocery and beverage stores were up 4.9% YOY but down 0.2 percent month-over-month seasonally adjusted.
  • Sporting goods stores were up 3.8% YOY and up 0.9 percent month-over-month seasonally adjusted.
  • Health and personal care stores were up 2.9% YOY and up 0.7 percent month-over-month seasonally adjusted.
  • Clothing and clothing accessory stores were up 2.3% YOY but down 0.9 percent month-over-month seasonally adjusted.
  • General merchandise stores were up 2.2% YOY but down 0.3 percent month-over-month seasonally adjusted.

YOY Losers:

  • Electronics and appliance stores were down 2.9% YOY and unchanged month-over-month seasonally adjusted.
  • Building materials and garden supply stores were down 0.6% YOY but up 1.4 percent month-over-month seasonally adjusted.
  • Furniture and home furnishings stores were down 0.1% YOY and down 0.5 percent month-over-month seasonally adjusted.

Online & Other Non-Store Watch:

  • Online and other non-store sales were up 14.3 percent year-over-year and up 1.6 percent month-over-month seasonally adjusted.

What do you think about the latest numbers and category trends?

All real estate investments carry risks. Nothing in this post shall be construed as tax or investment advice. A buyer and their tax, financial, legal, and construction advisors should conduct a careful, independent investigation of any property to determine to your satisfaction the suitability of the property for your needs.

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1031 Exchanges Explained

1031 Exchanges Explained

What is a 1031 Exchange?

A 1031 Exchange allows you to defer the taxes from a commercial property sale by reinvesting the proceeds from the sale in “like-kind” property, within the specified time frames, potentially saving you tens of thousands of dollars.

There are two critical deadlines that must be met.

Deadline #1: The 45-Day Property Identification Period

Within 45 days of the sale of your property, you MUST:

  • Identify a replacement property in writing to an intermediary, specifying the property you want to acquire.
    • You can identify three potential properties for the exchange as long as you eventually close on at least one of them.
      • The identification of the property must be specific and not ambiguous.
    • As an alternative, the 200% rule allows you to designate more than three properties, which may add up to a maximum of 200% of the exchange value.
  • The proceeds from the sale of the property must be held by a qualified intermediary, also known as an exchange accommodator.
    • To avoid taxes, the total value of the replacement property or properties must be equal to or greater than the relinquished property.  

Deadline #2: The 180-Day Exchange Period

  • You MUST close on the new property or properties within 180 days of the sale of the old or relinquished property.
  • The countdown on both deadlines begins simultaneously when the sale of your property closes.
  • There’s no limit to the number of times you can do an exchange so you only have to pay taxes on the final sale for which you want to realize or cash-out on the gains.

If your debt decreases in the exchange, the difference is treated as income–sometimes called boot–and is taxable as is any cash you may have left over after the exchange

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NOTE: 1031 Exchanges can only be executed with investment and business property, not primary residences.

Q&A

  • What is a like-kind property?  

According to the IRS, properties are of like-kind if they’re of the same nature or character, even if they differ in grade or quality. Real properties generally are of like-kind, regardless of whether they’re improved or unimproved.

 

  • How do I find a like-kind property within 45 days?

This can be tricky, which is why it is recommended that you work with a broker who has expertise in both the type of properties you are looking for and 1031 Exchanges

 

  • Why is broker expertise important?

There are thousands of properties listed, many expired or no longer available. Some have encumbrances or other issues that could delay the process impacting your ability to close or your timeline, or both, not to mention the hours of your own time you’ll have to put in to do the research.  An experienced broker can take all of that stress off your plate and provide you with a fully researched list of viable properties that meet or exceed your criteria.

All real estate investments carry risks. Nothing in this post shall be construed as tax or investment advice. A buyer and their tax, financial, legal, and construction advisors should conduct a careful, independent investigation of any property to determine to your satisfaction the suitability of the property for your needs.

#NetLeasePro #NNN #CRE #Retail #1031-Exchanges#NetLease #CREInvesting #STNL #BarryWolfe

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What Is A Single-Tenant Net-Leased Property?

What Is A Single-Tenant Net-Leased Property?

A STNL Q&A CHEAT SHEET

 

Q: What is a single-tenant property?

A single-tenant property is a freestanding retail, office, medical, or industrial building that is leased and occupied by one tenant, user, or company.

 

Q: What is a net lease?

A net lease is a type of commercial lease between a tenant and property owner where, in addition to paying the rent, the tenant–and not the landlord–is responsible for paying the rent as well as some or all of the building’s operating expenses such as insurance, taxes, maintenance, repairs, and utilities, depending on the type of net lease agreement.

The three most common types of net leases are:

  • Single Net Lease: Tenant pays Rent + Taxes
  • Double Net Lease: Tenant pays Rent + Taxes + Insurance
  • Triple Net Lease: Tenant pays Rent + Taxes + Insurance + Maintenance/Operating Expenses

 

Q: Which one gives me the most freedom?

The triple net lease affords the property owner the most freedom and flexibility.

 

Want to learn more? Watch our video here!

 

All real estate investments carry risks. Nothing in this post shall be construed as tax or investment advice. A buyer and their tax, financial, legal, and construction advisors should conduct a careful, independent investigation of any property to determine to your satisfaction the suitability of the property for your needs.

#NetLeasePro #NNN #CRE #Retail #Single-Tenant #NetLease #CREInvesting #STNL #BarryWolfe

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The Time/Money/Risk Benefits of Triple Net Leases

The Time/Money/Risk Benefits of Triple Net Leases

 

Investors will often hear that there are many benefits to triple net leases but for those who may be exchanging from multi-family, land, or manufactured home parks—or new investors that may have inherited property—the benefits of the triple-net, may not be clear.

A net lease is a type of commercial lease between a tenant and property owner.  The three most common types of net leases are:

  • Single Net Lease: Tenant pays Rent + Taxes
  • Double Net Lease: Tenant pays Rent + Taxes + Insurance
  • Triple Net Lease: Tenant pays Rent + Taxes + Insurance + Maintenance/Operating Expenses

For the purposes of this article we will conduct a Time/Money/Risk analysis on the triple net lease, which is where, in addition to paying the rent, the tenant-–and not the landlord–-is responsible for paying some or all of the building’s operating expenses such as insurance, taxes, maintenance, repairs, and utilities.

TIME:

Freedom

  • The triple net lease, whether on a single-tenant or multi-tenant property, affords the property owner the most freedom in terms of time and flexibility thanks to its hands-off management structure.

Hands-Off Management

  • With NNN properties, landlords can avoid the typical property management obligations and hassles to enjoy more time to dedicate to things they prefer to do. As noted earlier, in a triple net lease, also known as NNN, the tenant pays for and manages all of the building’s operating expenses, real estate taxes, insurance, and maintenance, freeing the property owner from the responsibility and hassle.

Assets That Hold & Grow Value

  • Triple net lease properties often attract corporate-backed credit tenants. Long-term leases with credit tenants allow your investment to grow and weather economic cycles.

 

MONEY:

Steady & Predictable Passive Income

  • Triple net properties allow property owners to receive a steady and predictable stream of income from a reliable source every month with minimal management and attention.

Reliable Source of Income

  • Single-tenant net-leased properties attract an array of corporate-backed credit tenants that provide greater long-term reliability.

Owner-Friendly Leases

  • Triple net leases often have built-in increases that offer opportunities for better planning for both the tenant and landlord, and provide a hedge against long-term inflation risk. In addition, they also often have options to extend in five or 10-year increments.

Defer Taxes at the Time of the Sale

  • When a property owner is ready to sell, 1031 Exchanges allow them to defer the capital gains on the property

 

RISK:

Less Risk

  • Triple net-leased properties tend to offer less risk than other commercial real estate investments that have tenants with non-investment grade credit profiles, although no investment is risk-free.

Longer Leases / More Stability

  • Triple net-leased properties have longer-term leases that provide greater stability and reduce risk and worry.

 

Ready to invest in a triple net property? Contact us at: 954-245-3416.

 

Learn more about NNN and single-tenant net-leased properties. Watch our video

 

 

All real estate investments carry risks. Nothing in this post shall be construed as tax or investment advice. A buyer and their tax, financial, legal, and construction advisors should conduct a careful, independent investigation of any property to determine to your satisfaction the suitability of the property for your needs.

#NetLeasePro #NNN #CRE #Retail #Single-Tenant #NetLease #CREInvesting #STNL #BarryWolfe

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Net-Leased Retail Research (Fall 2017)

Marcus & Millichap recently released the Net-Leased Retail Research Fall 2017 Report which looks at the current net-lease landscape including key indicators such as employment, 1031-exchange activity, retail sales growth, and the 10-year Treasury. Following are key highlights I gathered from the report:

  • Job growth remains steady, with gains averaging 174,000 positions per month over the past year. This has resulted in the unemployment rate reaching the lowest level since 2001.
  • Net-leased development remains the predominant sector of overall retail construction. Of the approximately 60.4 million square feet of retail space delivered over the past year, more than 46 million square feet was composed of single tenant net-leased retail. Dollar stores, quick-service restaurants, and pharmacies are the single-tenant concepts that have experienced the most construction activity in 2017.
  • Driven by investor desire to shift their portfolios toward less management-intensive assets, 1031-exchange volumes make up a considerable portion of the net-lease marketplace. So far in 2017, exchange-related buyers encompass more than 40 percent of transaction volumes. As a result, the status of this tax provision moving forward will remain a major driver of deal flow and investment demand. Any potential changes to the tax code that significantly impact 1031 Exchanges would have a serious impact on this sector so it is certainly something to watch closely.
  • Overall, leverage on acquisition loans has continued to reflect disciplined underwriting, with LTVs typically ranging from 60 percent to 70 percent for most retail properties. Going forward, The Federal Reserve’s plans to normalize its balance sheet will place upward pressure on interest rates.

The Net Lease Report also includes a summary of credit rating, number of locations and range of cap rates related to sales by several different brands and sectors. Download the report below. As always, at the Wolfe Retail Group of Marcus & Millichap, we are available to discuss this information in depth, including any impact this may have on any of your projects. We remain optimistic that 2018 will be another strong year for our sector of the commercial real estate industry. Feel free to message me via LinkedIn.

 

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