McNellis: A Great Year to Unload Crap

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[contextly_sidebar id=”9ca33a8e0ee125ba0d986e2e8742d4be”]We were in escrow eighteen months ago to buy a Northern California shopping center that at first blush looked compelling. It had a grocery store at below-market rent, a drug store that was doing fairly well and the center itself was attractive and maintained in a first-class condition. On the day we signed the purchase contract we were content, thinking we had found a project that, if fully priced, at least had untapped upside potential. Six weeks later when we understood just how many problems this center had—everything from a rent roll more fragile than ancient papyrus to a looming highway condemnation to an exhausted on-site sewage treatment plant—we ran for the exit, thinking ourselves lucky to be paying an enormous capital gains tax rather than be stuck with this asset through a 1031 tax-deferred exchange.

A crowd funded entity just bought this very center a month ago.

Two real estate magnates were enjoying a glass of Christmas cheer last week when one asked the other, “Was your best deal this year selling or buying?”

“Selling. It’s been a great year to unload crap.” And so it was. Properties with locations worse than hell itself have been fetching top dollar, leaving one to wonder who could be buying this junk. One possible answer: crowd funded syndicators.

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