1031 Exchange Options Analysis for Your Strip Center
Current Property Summary
Current NOI: $283,779
Cap Rate: 5.50%
Estimated Sale Price: $5,159,623
Net Proceeds after 5% Commission: $4,875,844
This analysis uses your net proceeds of $4,875,844 as the basis for reinvestment in a 1031 exchange. To fully defer taxes, replacement properties should generally equal or exceed the relinquished property's value, but we focus on options close to or above your net proceeds, assuming all-cash transactions for simplicity.
Benefits of 1031 Exchange into Single-Tenant Properties
- Defer capital gains taxes by reinvesting proceeds into like-kind properties.
- Improve cash flow by selecting properties with higher cap rates.
- Enjoy hands-off management with triple-net (NNN) leases where tenants handle maintenance, taxes, and insurance.
- Focus on Quick Service Restaurants (QSR) with drive-thrus for strong re-tenanting potential in desirable locations.
- Diversify into stable, single-tenant assets to reduce management hassle compared to a multi-tenant strip center.
Recent Sold Comparable Properties
To provide credibility and insight into market trends, below are examples of recently sold single-tenant properties, including QSR with drive-thrus. These demonstrate actual cap rates achieved in recent transactions, which can inform expectations for similar deals.
| Tenant | Address | Price | Cap Rate | Sale Date | Lease Term (Years) | Image |
|---|---|---|---|---|---|---|
| Konala & The Bunker Bar | 702 N Spokane St, Post Falls, ID 83854 | $3,000,000 | 8.00% | Oct 31, 2024 | 10 |  |
| Jack in the Box | 16022 Meridian Ave E, Puyallup, WA 98375 | $2,390,000 | 7.41% | Sep 30, 2024 | 5 |  |
| Burger King | 2095 S Santiam Hwy, Lebanon, OR 97355 | $1,750,000 | 7.17% | Jun 13, 2024 | 10 |  |
| Burger King | 1445 N Pacific Hwy, Woodburn, OR 97071 | $1,750,000 | 7.17% | Jun 13, 2024 | 10 |  |
| Subway | 910 Koala Ave, Omak, WA 98841 | $575,000 | 7.72% | Mar 29, 2024 | 10 |  |
These recent sales highlight cap rates ranging from 7.17% to 8.00% for QSR and similar properties, often with solid lease terms, supporting the potential for improved yields in a 1031 exchange.
Available On-Market Property Options
Below is a list of on-market comparable properties, including QSR options with drive-thrus where applicable.
| Tenant | Address | Price | Cap Rate | NOI | Lease Term (Years) | Link |
|---|---|---|---|---|---|---|
| Dollar General | 1008 S Chiloquin Blvd, Chiloquin, OR 97624 | $1,736,772 | 7.25% | $125,916 | 7.2 | View |
| Jack in the Box | 2602 NE 238th Dr, Wood Village, OR 97060 | $2,385,000 | 6% | $143,100 | 10 | View |
| Chipotle | 2612 E Baseline St, Cornelius, OR 97113 | $3,771,667 | 4.50% | $169,725 | 15 | View |
| Arby's | 2233 Biddle Rd, Medford, OR 97504 | $1,978,000 | 6.25% | $123,625 | 13.3 | View |
| Sunday Goods | 1616 E Glendale Ave, Phoenix, AZ 85020 | $4,074,215 | 9.00% | $366,679 | 9 | N/A |
| DaVita | 198 Ponderosa Rd, Colville, WA 99114 | $1,625,000 | 7.02% | $114,000 | 4.6 | View |
| Perkins | 2000 Channing Way, Idaho Falls, ID 83404 | $2,250,000 | 7.32% | $164,593 | 10 | View |
| The Learning Experience | 16450 W Yuma Rd, Goodyear, AZ 85338 | $5,540,000 | 7% | $387,688 | 17.4 | View |
| Applebee's | 2500 Capital Mall Dr SW, Olympia, WA 98502 | $2,200,000 | 7.00% | $153,730 | 5 | View |
| Sportsman's Warehouse | 611 Valley Mall Pkwy, East Wenatchee, WA 98802 | $2,988,514 | 7% | $209,196 | 7.4 | View |
| The Goddard School | 720 E Warner Rd, Gilbert, AZ 85296 | $4,795,000 | 7% | $335,628 | 15 | View |
Exchange Scenarios
We've outlined several scenarios below, including single-property and multi-property options. Focus is on improving cash flow (NOI) while prioritizing QSR with drive-thrus where possible. All assume hands-off NNN structures. For total investments exceeding net proceeds, additional capital is needed for an "up-trade" (still allows full tax deferral). For lower totals, there may be taxable boot unless mitigated. Recent sales data supports the viability of these cap rates.
Scenario 1: Single Property - The Learning Experience (Hands-Off Childcare)
A long-lease, single-tenant property with strong stability and hands-off management.
| Property | Price | Cap Rate | NOI | Lease Term |
|---|---|---|---|---|
| The Learning Experience | $5,540,000 | 7% | $387,688 | 17.4 years |
Total Investment: $5,540,000
Additional Capital Needed: $664,156
New Annual Cash Flow (NOI): $387,688
Change in Cash Flow: +$103,909 (+37%)
Average Cap Rate: 7.00%
This up-trade increases cash flow significantly while maintaining a hands-off asset.
Scenario 2: Single Property - The Goddard School (Hands-Off Childcare)
Another stable childcare option with a solid lease term, closely matching your proceeds.
| Property | Price | Cap Rate | NOI | Lease Term |
|---|---|---|---|---|
| The Goddard School | $4,795,000 | 7% | $335,628 | 15 years |
Total Investment: $4,795,000
Boot (Potential Taxable): $80,844
New Annual Cash Flow (NOI): $335,628
Change in Cash Flow: +$51,849 (+18%)
Average Cap Rate: 7.00%
Minimal boot; easy transition to a higher-yield, hands-off property.
Scenario 3: Single Property - Sunday Goods (High-Yield Retail)
A high-cap rate option for maximum cash flow improvement, though not QSR-specific.
| Property | Price | Cap Rate | NOI | Lease Term |
|---|---|---|---|---|
| Sunday Goods | $4,074,215 | 9.00% | $366,679 | 9 years |
Total Investment: $4,074,215
Boot (Potential Taxable): $801,629
New Annual Cash Flow (NOI): $366,679
Change in Cash Flow: +$82,900 (+29%)
Average Cap Rate: 9.00%
Significant cash flow boost; consider if the tenant aligns with your preferences.
Scenario 4: QSR Combo - Perkins + Applebee's + Arby's (Drive-Thru Focus)
A diversified portfolio of QSR/restaurant properties with drive-thrus, emphasizing re-tenanting ease.
| Property | Price | Cap Rate | NOI | Lease Term |
|---|---|---|---|---|
| Perkins | $2,250,000 | 7.32% | $164,593 | 10 years |
| Applebee's | $2,200,000 | 7.00% | $153,730 | 5 years |
| Arby's | $1,978,000 | 6.25% | $123,625 | 13.3 years |
Total Investment: $6,428,000
Additional Capital Needed: $1,552,156
New Annual Cash Flow (NOI): $441,948
Change in Cash Flow: +$158,169 (+56%)
Average Cap Rate: 6.87%
Strong cash flow increase with QSR focus; up-trade allows full deferral.
Scenario 5: QSR Combo - Jack in the Box + Perkins (Drive-Thru Focus, Closer to Proceeds)
A two-property QSR combo for balanced cash flow improvement and easier re-tenanting.
| Property | Price | Cap Rate | NOI | Lease Term |
|---|---|---|---|---|
| Jack in the Box | $2,385,000 | 6% | $143,100 | 10 years |
| Perkins | $2,250,000 | 7.32% | $164,593 | 10 years |
Total Investment: $4,635,000
Boot (Potential Taxable): $240,844
New Annual Cash Flow (NOI): $307,693
Change in Cash Flow: +$23,914 (+8%)
Average Cap Rate: 6.64%
Modest improvement with QSR emphasis; boot can be minimized with adjustments.
Next Steps
These scenarios demonstrate potential cash flow improvements and alignment with your QSR preferences. Consult a 1031 exchange specialist or tax advisor for personalized details, including debt considerations, exact boot calculations, and closing costs.
Action Plan
- Identify Replacement Property(ies) within 45 days – short-list above satisfies.
- Negotiate PSA with 1031 contingency – target 60-75 day close.
- Engage qualified intermediary – hold proceeds day-1.
- Review lease guarantees & term left – prioritize 10+ yrs or corporate guarantee.
- Perform Phase-I & rent roll audit – confirm NNN pass-throughs.
- Close simultaneously – defer 100 % of estimated $1.26 M capital-gain liability.