As one of the industry's top providers of securitized replacement properties for 1031 exchange transactions, Inland Private Capital Corporation (IPC) continues to perform for investors with its sale of two wholesale club properties.
East Coast Wholesale Portfolio DST, an investment program sponsored by IPC, acquired the two clubs – a 115,660-square-foot property in Attleboro, Massachusetts, and an 89,348-square-foot property in Baltimore, Maryland – in 2016. Both assets were 100 percent leased to BJ's Wholesale Club, Inc., a membership-only warehouse club chain based in Westborough, Massachusetts, primarily operating along the United States' East Coast.
IPC’s subsidiary, which served as asset manager for the investment program, facilitated the sale of two BJ's Wholesale Clubs in 2021. The timing of IPC's disposition of the properties proved beneficial for investors, who received a 153 percent total return, taking into account the total funds received by investors during the hold period plus net sales proceeds, after just six years*. Keith Lampi, president and chief operating officer of IPC, notes the importance of understanding certain asset classes' market dynamics to make informed disposition decisions – and ultimately a successful portfolio sale.
"Throughout the pandemic, we observed aggressive capitalization rate compression on essential business tenants such as warehouse clubs, especially throughout the triple net lease segment of the market," said Keith Lampi, President and Chief Operating Officer of IPC.
"Given the potential for strong valuations, we decided to market the portfolio for sale, resulting in a favorable outcome to investors with average annualized returns ranging from 8.9 to 10.9 percent."**
The sale illustrates IPC's long-held belief that private real estate can provide significant value to investors who work with sponsors that know how to source and acquire quality assets and, perhaps more importantly, know when to sell.
The transaction provided liquidity to the DST investors, allowing them to take their proceeds for other uses or to use those proceeds to complete a subsequent 1031 exchange into another DST investment and continue deferring capital gains taxes.
Inland Private Capital Corporation remains one of the most active securitized private real estate sponsors in the US, having monetized more than $1.5 billion in real estate in 2021. The company also offers Qualified Opportunity Zone investments for investors seeking tax-advantaged real estate investment opportunities.
To learn more about the sophisticated DST 1031 exchange strategy for your clients that own investment property, visit The Inland Academy today.
*Past performance is not a guarantee of future results.
** "Average Annualized Rate of Return" is a common performance metric of real estate investments and is the average annualized return which takes into account the duration of the program, cash flow from the portfolio's operations and proceeds from the sale.
Important Risk Factors to Consider
An investment in a Delaware statutory trust (DST) involves certain risks including but not limited to tax risks, general real estate risks, risks relating to the ownership and management of the properties, risks related to the financings, risks relating to a private offering with an associated lack of liquidity, and risks relating to the DST structure.
Investments in real estate assets are subject to varying degrees of risk and are relatively illiquid. Several factors may adversely affect the financial condition, operating results and value of real estate assets. These factors include, but are not limited to: