Everyday, for my 1031 exchange buyer clients, I sort through and review dozens, if not hundreds, of NNN properties for sale.
We look at location, lease term, cap rate, traffic counts, demographics, employment, type of building construction, comparable rent and sale prices and more to determine if the properties are worthy of client consideration.
Today, while looking through Tractor Supply properties for sale for 1031 exchange I noted the following. While these TSC NNN deals could be good for certain investors, they do not work well for 1031 exchange buyers looking for long term secure cash flows with the ability to pay cash or place new financing.
Tractor Supply For Sale WV: While the tenant just renewed the lease and it is an older absolute NNN lease, this deal has been on the market what seems like for 5 years. Loopnet shows about 15 months however I remember looking at this deal in 2012. My email tells me it has debt that must be assumed at 5.93% interest rate which is unattractive in a 4% +/- market. Not sure what the scoop is today but it obviously has hair.
Tractor Supply For Sale in SD: This is a nice property in a perfect rural market for TSC however the lease only has two years left. TSC will not give an indication if they will renew or not. SD is an no income tax state which is highly desirable for investors but two years left on the lease even at a decent cap rate is too risky for most 1031 buyers looking for stability and peace of mind.
Tractor Supply For Sale in Inline Spaces: There are several low price point deals on the market that are in former big box tenant spaces or in-line spaces such as Wal-mart, Pamida or Sears. While the cap rates are higher than stand alone deals the buildings are older, the leases are NN instead of NNN and the leases are for only ten years rather than 15 years. These are OK if the market is growing or if the adjoining retail is filled up or is almost leased. A lot of these locations are all vacant except for the TSC. TSC will bring more traffic but I think the risk is higher. What if newer construction gets built over the ten year term on the other side of town or on the outskirts? TSC will most likely move out to a new build to suit location and you’ll be left with an old vacant building which is too big for most tenants.
Other things to watch out for when looking to buy Tractor Supply NNN properties for sale are:
- “representative photos” brokers show this beautiful build to suit photo in marketing only to find out the actual property is a portion of an old Walmart or Sears and is actually very tired looking.
- advertised as triple net when the lease is actually double net. Some of the new leases would almost be single net with the landlord responsible for roof, structure, parking lot, insurance, gutters, windows, utility connections etc.
- new construction deals: if in a 1031 exchange make sure the building can be delivered, with lease and rent commenced well within your 180 days. If there are construction delays and the developer can’t deliver the premises to the tenant and the lease has not commenced you could be up sh!t creek.
There are many other great Tractor Supply properties for sale on the market today. 15 year leases, new buildings, great locations or even old seasoned locations where TSC has re-upped for another 10 or 15 years.
I would love to help you find a Tractor Supply for sale for your 1031 exchange. Give me a ring at 866-539-1777 or email me. Happy to help!
Build to Suit Tractor Supply Image - Free Standing Location
Former Sears Big Box being turned into a TSC - while the remodel will be nice I am sure there are risks here.
