Buyers Guide

7 Eleven NNN Lease Tenant Report

7 Eleven is the world’s largest operator, licencor and franchisor on convenience stores. It operates over 8,200 stores in North America alone and it is hard not to see a 7 Eleven NNN Lease property on any corner. With over $53 Billion in sales worldwide it dominates with strong credit and a dominate brand recognition.

7-Eleven focuses on meeting the needs of convenience oriented customers by providing a large selection of high-quality and fresh products at fair prices and a clean and shopping environment. Each store’s selection of about 2,500 different products and services is tailored to meet the needs and preferences of local customers in the market. Most 7 Eleven store locations are corner locations and have high visibility and traffic access. To view our current inventory of 7 Eleven NNN Lease properties for sale visit our 7 Eleven for Sale page

7 Eleven NNN Lease7 Eleven NNN Lease properties are also filling stations as well, so investors can choose a walk up, non gas and gas 7 Eleven location. For all of the sites 7 Eleven typically sits on sites that receive 25,000 cars passing per day with good visibility exposure. Currently 7 Eleven is expanding and opening up more non gas convenience store concepts to fit in small retail strip centers, single tenant locations and retail condos. Typically you will see this in places where it is a high barrier to entry from competitors. For typical gas station sites 7 Eleven prefers ground lease (Fee Simple – Land & Building is also available as well) corner locations or in out-parcels of shopping centers with around 0.8 acres to 1.0 acres of land. For their smaller concepts they typically prefer parcels with 1,000 square feet to 2,500 square feet buildings.

7 Eleven NNN Leases are generally 20 years in length initially, some sites are 15 years. Investors enjoy the rental increases of 10% to 15% every 5 years. Some investors are leery of filing stations because of the environmental concerns but with other options like the convenience store concept are alternatives to that. For 7 Eleven ground leases, those investments do not allow for depreciation but there are fee simple options available that investors can choose from. The convenience locations are typically on small land which doesn’t add much intrinsic value but with brand recognition and long term tenancy that can be more of a positive than a negative for investors.

7 Eleven has a strong tenant credit rating of S&P AA-, one of the highest in the industry. With over $53 Billion in sales and the top name brand for convenience and gas investors feel comfortable with the long term value of this investment. 7 Eleven is constantly evolving giving more confidence to the brand with its recent delivery service and the expansion of its Locker space program which they pioneered with Amazon in 2011. Owning a fee simple investment will allow for accelerated depreciation which is beneficial for tax purposes. Other options for gas stations are Wawa Gas Stations and Circle K Gas Stations Average price is just over $2,000,000 nationwide with CAP rates ranging from 5.25% to 6.00% depending on the remaining lease term and location. Most leases are absolute net lease allowing for no landlord responsibility, this works great for investors that live out of state or 1031 exchange investors seeking suitable replacement property.

To browse available properties go to our 7 Eleven For Sale page

Tenant Overview

7 Eleven NNN lease properties are part of an international chain of convenience stores and gas stations with more than 53,000 locations world-wide, making it the world’s largest operation, franchiser and licensor of convenience stores. 7-Eleven brand locations are under the parent company Seven & I Holdings Co., they are located in 16 countries. 7 Eleven’s American division is headquartered in Dallas, Texas. Seven & I Holdings Co., Ltd. is a retail holding group headquartered in Tokyo, Japan. 7 Eleven has recently been ranked along with other accolades by Forbes magazine as No. 2 “Top Franchisee for the Money” for 2012 and No. 3 “Top 20 Franchises to Start” for 2011. Along with that, 7 Eleven additionally was ranked No. 3 on Entrepreneur magazine’s “Franchisee 500” and No. 1 in Store Growth by Convenience Store News for 2012.

It’s store locations are located in sixteen countries, with the largest markets being United States, Japan, Canada, the Philippines, Hong Kong, Taiwan, Malaysia and Thailand.


 

About 1031 Exchanges

1031 Exchange PropertiesIf you are a property owner you more than likely have heard of the term 1031 exchange before and the many who have heard of this term may not know much about other than you have to do one to defer taxes. Starting out in the brokerage business I use to hear this term all the time from my owner clients of what to do on every deal they do. Of course it is not required but most smart investors utilize this strategy over and over again.

The term is getting ever more popular with real estate agents, to title companies, investors, mortgage companies and even soccer moms. Most of the calls I get now with investors selling a piece of property usually say “I’m 1031ing” or “do you sell 1031 properties” as if it is a special type of property like a office building or shopping center.

WHAT IS A 1031 EXCHANGE

So what is a 1031? or “1031ing” like others call it. In technical terms it is the Internal Revenue Service code section 1031. In basic terms it is a swap or an investment asset for another (it is not restricted to just real estate, it can include businesses but most of the time real estate is the most common) When you sell your investment property or business, you generally pay capital gain taxes at the time you close, with 1031 exchange you can postpone paying taxes on the capital gain if you reinvest the sale proceeds into a similar or like-kind exchange. This would allow you to either have no tax at the time of the close of the sale or a limited amount. 1031’s are not a tax-free option but gives you the advantage to defer at that time.

SOME RULES OF A SUCCESSFUL 1031 EXCHANGE

When you sell your property you must trade equal or up to in equity and or debt. You must also identify a replacement property within 45 days. Not one day later (even if it is on a weekend) I have heard horror stories as well as clients calling me at the last minute to identify a property and some lose out on the opportunity to do a 1031 exchange. There is also a lot of mis-education out there and many investors are stuck paying heavy tax burdens. Once you find the right property and your identified it you then have up to 180 days to close on that property from the date you closed on your relinquished property. Some investors use their equity and financing to purchase properties and if everything doesn’t go right it may take longer to close then expected, so make sure everything is lined up before moving forward.

What is a 1031 Exchange

Generally you cannot go wrong in an exchange if you remember the simple rule that “You must trade equal or up in equity and/or debt”. You may do a deferred exchange, but you must identify qualified replacement property within 45 days of the date you close on your relinquished property. You must actually close on the acquisition of the identified property within 180 days of the date you closed on your relinquished property.

You can complete an exchange as long as the relinquished property and the replacement property meet the definition of “like kind”. “Like kind” means the properties must be held for investment purposes or productive use in a trade or business (income producing). Basically, “like kind” property is any property not used as a personal residence. “Like kind” property may include leasehold interests of 30 years or more in duration, conservation easements, water rights, timber rights and mineral rights. Personal property exchanges are more specific in what is “like kind”, but can also be successful in completing livestock, equipment and vehicles.

The cool thing about 1031 exchanges is that there is no limit on how many times you can do it. You can roll the capital gains over from one piece of investment property to another, to another and so on. You of course you may have an profit on each replacement but you avoid paying tax until you sell the investment property for cash many years later. I had a client who had multiple vacant and partially vacant apartment buildings in New York City and she did a 1031 exchange into a fully occupied apartment building and a few years later exchanged it into a single tenant net lease property. Later after profiting off of each property she ended up paying only one tax, which was a long-term capital gain rate.

In addition to the basic issues in each exchange, exchanges may have some especially complicated issues or traps for the unwary. Forgotten depreciation may lower the basis even more than originally thought or be subject to recapture. Related party ownership may create additional holding requirements. Property used for both personal residence and business or investment purposes may require some extra thought with regard to deal structuring. The 45 day identification period and the 180 day window for completion of the exchange can require some extra attention to detail. Building improvements on the replacement property may require extra work. Constant changes by the Tax Code regulations and other IRS Like-Kind Exchange and Treasury guidance requires that your exchange company be “up to speed” on the changes.

There are very specific 1031 exchange identification requirements for identifying potential like-kind replacement properties in your 1031 exchange transaction. The prospective like-kind replacement properties that you identify as part of your 1031 exchange do not need to be under contract or in escrow when you identify them.

1) REAL PROPERTY USE: Both your old and new properties must qualify as investment or business use. If both properties pass this test, you can exchange nearly any type of real estate.

2) 45 DAY IDENTIFICATION PERIOD: A seller must identify another replacement property that he proposes to buy within 45-day period from the date he sold his relinquished property. The 45-day timeline is very rigid and does not allow any variances (even if the 45th day should fall on a weekend or holiday.) Note that during this period, the proceeds from the sale of the relinquished property are in the custody of the qualified intermediary.

3) 180 DAY EXCHANGE PERIOD: An individual has 180 days from the date of selling their property that was the basis for the 1031 to receipt of the newly-acquired property.

The period within which the person who has sold the relinquished property must receive the replacement property is referred to as the “Exchange Period” under 1031 of the IRC. This period ends at 180 days after the date on which the person transfers the property relinquished or the due date for the person’s tax return for the taxable year in which the transfer of the relinquished property occurred, whichever is earlier. A word of caution: Many ill-advised or careless investors see the language referring to the due date for their tax return and assume they can wait until the last minute to purchase the new property. Remember – the deadline is the EARLIEST of the two scenarios. If an individual were to sell their 1031 property in May, the deadline for acquiring a new property (180 days) would fall well before their tax return in the spring of the following year. While the utilization of 1031 exchanges can be an extremely valuable tool for maximizing tax savings, it is a very complex process and often difficult to navigate.

IDENTIFICATION RULES AND EXCEPTIONS 1031 EXCHANGE ID RULES

You must comply with at least one of the following identification rules or exceptions when completing the identification of your like-kind replacement properties:
It’s advised that you get a purchase agreement set up and a replacement property in mind before starting the 1031 process. This is because “The three-property rule” (under 1031 tax exchange regulations) declares that the exchanger of a relinquished or replacement property may identify up to 3 replacement properties, regardless of their value.

THREE (3) PROPERTY IDENTIFICATION RULE

The three (3) property identification rule limits the total (aggregate) number of like-kind replacement properties that you can identify to three (3) potential like-kind replacement properties. The vast majority of Investors today use this three (3) property identification rule.

You could acquire all three of the identified like-kind replacement properties as part of your 1031 exchange, but most Investors only acquire one of the three identified properties. The second and third identified properties are merely identified as back-up like-kind replacement properties in case you can not acquire the first property.

You will skip the three (3) property identification rule and use the 200% of Fair Market Value Rule if you are trying to diversify your investment portfolio and wish to identify more than three (3) like-kind replacement properties.

200% OF FAIR MARKET VALUE IDENTIFICATION RULE

You can identify more than three (3) like-kind replacement properties as long as the total (aggregate) fair market value of all the identified like-kind replacement properties does not exceed 200% of the total (aggregate) net sales value of your relinquished property(ies) sold in your 1031 exchange. The limitation is only on the total (aggregate) identified value. There is no limitation on the total number of like-kind replacement properties. For example, if you sold relinquished property(ies) in the amount of $2,000,000 you would be able to identify as many like-kind replacement properties as you want as long as the total (aggregate) value of the identified like-kind replacement properties does not exceed $4,000,000 (200% of $2,000,000).

95% IDENTIFICATION EXCEPTION

If more than three properties have been identified, and their total fair market value exceeds 200% of the value of what was sold, the exchange may still be valid if 95 % of the total cost of all properties on the list are purchased. This means if there are properties costing $100,000 on your list, then you must purchase at least $95,000 of them.

1031 Exchange Intermediaries

A intermediary is a person who holds the proceeds until the exchange is complete. Be careful on who you select as many stories that resulted in investors missing deadlines and having tax liabilities. You can not be your own facilitator.


 

INVESTORS RESOURCES

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