Retail / Office Property – Texas – 29,598 Sq. Ft. on 1.26 Acres
A restaurant management group owned several units of Wendy’s, a well-known fast food chain. They had recently sold over 100 locations in their portfolio which resulted in significant capital gains. Of course, in addition to these capital gains came increased tax liabilities which would effect the total income of the sale. The group was looking to sell another 4 properties but wanted to do something that could benefit their overall profitability.
With numerous Bargain Sale transactions on his resume, a Welfont National Acquisitions Director reached out to the restaurant group’s brokers with Marcus & Millichap. At first, the brokers were not familiar with the IRS Section 170 Bargain Sale. But Welfont’s Director thoroughly explained the process and provided several resources packed with information. These included websites, case studies, videos and more. And in the end, the Marcus & Millichap brokers had a good understanding of the Bargain Sale.
Welfont sent Marcus & Millichap an offer on the 4-property portfolio on behalf of a nonprofit client. Along with offer, a Letter of Intent (LOI) was given to the brokers to present to their sellers. Once the LOI was signed, a Purchase and Sale Agreement (PSA) was drawn up based on the LOI. The sellers and buyer came to an agreement and both executed the PSA. A MAI appraiser made a final valuation on the properties and all due diligence was conducted, and thus the transaction was finalized.
- The restaurant management company was able to cover their tax situation generated by a previous 100+ property portfolio sale. The Bargain Sale allowed them to utilize a charitable tax deduction which offset gains from the portfolio sale. Had they not used the Bargain Sale, they either would have had to do a 1031 Exchange or pay a large tax bill.
- Welfont’s client, the nonprofit, can use the proceeds of reselling the 4-property portfolio to fund its programs and better serve others.
- The Marcus & Millichap brokers received a commission better than what a full-price offer would have yielded.
The examples, situations and hypotheticals contained in this document are intended for educational and informational purposes only. Welfont highly recommends you obtain the advice of your financial, tax and legal professional before making any financial and or contractual decisions. Welfont makes no guarantees or warranties in regards to the accuracy of the information herein contained. Welfont accepts no responsibility because of any actions you may take after reviewing this document. This document is not intended to be legal, tax or financial advice. Welfont Reserves All Rights.