Freedman Consulting

Freestanding Investment Grade Net Leases

• No management
• 10-25 years of income guaranteed by an investment grade (S&P rating of A+ to BBB-) corporation
• Most convenience retail property is usually located at an intersection.
• Quick and simple due diligence
• May be able to assume and pay down existing (construction) financing to meet debt/equity requirement under Section 1031
• Long-term, permanent, non-recourse financing is available from life companies and conduit lenders on a variety of terms and conditions (10/30, 10/25, 20/20, 20/22-26)
• The property may be able to be bifurcated, which eliminates the 55% estate tax (on the equity and its appreciation) upon demise of the taxpayer/exchanger.
• Equity can be refinanced out on a tax-free basis after the exchange is complete.

Freestanding Investment Grade Zero Cash Flow Bond Leases

• No management
• 20-25 years of income guaranteed by an investment grade (S&P rating of A+ to BBB-) corporation
• Highly leveraged, usually up to 87% (plus or minus) loan to value, and
• All of the rent goes to pay debt service.
• Buyers of these zeros are usually "cash out" buyers, involuntary conversion buyers, deemed sale (foreclosure) buyers, various tax-related partnership debt replacement buyers, or highly leveraged 1031 buyers.
• Lower leverage or free and clear 1031 buyers also buy these properties, pay down the debt at closing and then refinance post-exchange.