IRVINE, Calif. – Faris Lee Investments, a leading retail-specialized investment advisory firm, has completed the nearly $11 million triple-net zero cash flow ground lease of a 175,000-square-foot single-tenant property occupied by Lowe’s Home Improvement located at 7751 North El Capitan Way in Las Vegas, NV. There are approximately 16 years remaining on the tenants’ long-term lease and when the lease term is up, the new buyer will own the property free and clear.
Shaun Riley, Patrick Luther and Jeff Conover of Faris Lee Investments represented the seller, Los Angeles-based Caroline’s Court II, LLC. The 1031 exchange buyer, Chicago-based First Acorn, LLC, was represented by Bob King of TRI Commercial.
In order to generate the maximum amount of interest, the offering was marketed to 1031 exchange investors needing to replace a significant debt amount in their 1031 exchange, while requiring a passive, ease of management investment. Faris Lee positioned the offering to potential buyers with the options of being able to either assume the existing loan with zero cash flow, or to purchase with all-cash or with new financing. Because Faris Lee positioned the property with these flexible options, the firm was instrumental in maximizing the return on investment goals of the seller.
Faris Lee had multiple offers, but identified the ideal buyer who was in a 1031 exchange.
“This property was an ideal fit for the buyer as it helped him complete his 1031 exchange,” said Riley. “The investment with the existing financing does not yield any cash flow for the next 16 years. Because of this structure, the buyer was able to purchase the property at a 6.75 percent cap rate, which is slightly higher than the offers received from investors requiring the property to be delivered free and clear of existing debt at closing. Additionally, the buyer has the security of knowing that he will own the property free and clear at the end of the initial lease term.”
Riley added that in this zero cash flow situation, the buyer assumed the existing loan of $7.66 million where the monthly debt service equaled the monthly rent being paid with the loan being fully amortized at the end of the initial term of the lease in July 2030. The purchase price exceeded the existing loan amount by 40 percent, a record pricing structure for a zero cash flow investment.
Built in 2010 and situated on 11.23 acres, the property is located in the direct path of growth in the Las Vegas Valley at the on/off ramp of US Highway 95 and N. Durango Drive. It benefits from excellent street visibility along N. Durango and El Capitan Way, and features a large monument sign visible from Highway 95. The Lowe’s property is also located adjacent to an Albertson’s and Walgreens. There are approximately 150,000 people living within a five-mile radius of the property with an average annual household income of $96,000.