https://autozone.comThe 1031 Doctor LOVES ground leases with below market rents and looks for deals that you hope and pray become vacant! This Denver AutoZone ground lease in Denver is by far a better bet than buying a US treasury bond! and there is considerable value being suppressed because of the low ground rent. AutoZone is a behemoth publicly traded company (AZO) that has been blowing up in value for many years but recently trending down due to its massive stock run with the general market. This sector is high profit margin, and AutoZone has over 7,000 Stores and growing. Denver has been a great place to invest over the years and while it has its political issues it’s a beautiful to live and work and the retail sector out-performs on a consistent basis.
The reason the 1031 likes this deal, besides the obvious, is that there is only 20 years of option left on the deal and you can easily attribute an annual return of 10-15% over this period of time. In addition, the valuation of this property will go up after each option period with the next buyer having to wait less and less time until all the options are gone and you can begin to negotiate a new lease with the tenant earlier than the actual termination date. In other words, when the tenant exercises their last five-year option, you could have a chance to negotiate with them for additional options closer to market and unlock the value in fifteen years, rather than waiting twenty. often times them will consider extending terms depending on the market conditions, especially knowing how long it take to get entitlements. This site is large enough for a major fast-food operator and likely that would be the highest and best use for the property. Remember, you don’t get to depreciate this deal because it’s a ground lease but once they leave and the building actually reverts, and if you have the ability or need to depreciate, then you can work this out with your CPA down the road because you will have taken possession of the structure.
This property is close to Buckley SFBhttp://www.buckley.spaceforce.mil base, which is always GREAT to have nearby for obvious reasons and close to the Denver Airport. I like this deal closer to $1,300,000 but it’s worth every penny of what the seller is asking and will sell to a 1031 exchange buyer pretty quickly.
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