A young RN and former schoolteacher decided to leave the big city and stake their claim in Chico, CA. This couple’s dream was to create a best-in-class senior/assisted-living facility to provide a tremendous quality-of-life for those in their final years. Bootstrapping was the only way forward for the Kupermans but they had a vision and were undeterred. Over 2 decades later, the business and real estate holdings had grown from a 6-bed (in 1 small rental home) facility to a large operation spanning 5 commercial assisted-living facilities. When the Kupermans decided to slow down & begin enjoying the fruits of their labors, their entire operation was put on the market for sale. The blue skies of 2019 soon turned dark & ominous in 2020 when the impact of covid-19 threatened what they had built. Fortunately, patience and persistence won; the clouds parted, and the assisted-living facilities were sold.
Deferring capital gains taxes with 1031 exchange experts
Following the completed disposition, the Kupermans now faced a massive capital gains tax liability of approximately 40% total! Rather than have a huge chunk of what they had earned by blood, sweat and tears be stripped away by the government, Kupermans elected to move forward with a 1031 Exchange transaction to defer their capital gains taxes. The Kupermans engaged Lowrey Burnett, CCIM with Fountainhead Commercial to execute on their strategy to defer taxes by acquiring income-producing commercial real estate investments.
Nationwide CRE property search
Stabilized CRE assets providing passive income with reasonably strong yields from credit-worthy tenants were the targets. The yields in California were too low to meet cash-flow requirements so the CRE property search went nationwide. Burnett, from his office in Colorado, collaborated with the Kupermans to identify viable assets in Minnesota, Colorado, Oklahoma, Texas, and Florida prior to the 45-day deadline required by the IRS for 1031 Exchanges. The strategy was to close on 3 separate assets that would provide geographic diversification; product-type diversification (e.g., Industrial; Retail; Office, DST, etc.); tenancy/industry diversification with staggered lease expirations.
1031 exchange transaction closed
Ultimately, 50% was invested in a 17,000 SF single-tenant light-Industrial asset in Minnesota with a long-term NNN lease to a credit-worthy tenant that is top 3 internationally within their industry. 35% was invested in a single-tenant retail asset in Colorado leased to an ‘essential’, institutional-credit tenant which benefited from Interstate access & proximity to that state’s most elite ski resorts. The remaining 15% was invested in a multi-state, multi-property DST (Delaware Statutory Trust). With the expertise from 1 of the commercial lenders Burnett had recommended to the Kupermans, as well as a top-flight Financial Planner, Accountant, Attorney, Inspector, and Qualified Intermediary (Q.I.), the 1031 Exchange transactions were Closed, without a hitch, within the required 180-day deadline.
Every deal is exciting, fun & challenging in different ways…All involved embraced the challenges and survived the COVID-19-related shutdowns; unpredictable lending environment; wild Colorado snowstorm, and even Mr. Kuperman’s Le Mans style driving!
Kuperman’s recommendation
“We wanted to take this opportunity to provide a testimonial regarding our experiences with Fountainhead Commercial, and specifically Mr. Lowrey Burnett. To put it simply, we will not hesitate to seek out Mr. Burnett, moving forward, if we are engaging in a 1031 Exchange process. Our experience and time with Lowrey was a pleasure, and the outcome of our 1031 Exchange was exactly what we were seeking.
We were introduced to Lowrey by our wealth management team when we sold our properties, and wanted to pursue an exchange. This was our first time going through the process, so we were a bit apprehensive, uncertain, and worried that we wouldn’t be able to get the type, nor quality, of portfolio we wanted within the parameters, and rigid timing, required for a 1031 Exchange. From a professional standpoint, Lowrey made the process as easy as it could be, and we found him to be responsive, efficient, collaborative, and diligent in the performance of his job. His time management and organizational skills were also exceptional. Ultimately, with his support, we have acquired properties that we like, in good locations, with sound tenants and reasonable lease terms, and did so within the confines of the exchange path.
Personally, we also enjoyed our time with Lowrey. He made a point of meeting us at every property, which we really valued, and coordinating our visits in a seamless manner, all of which afforded us time to get to know each other. We found him to be personable and interesting, and we appreciated the chance to learn about his life, his wife, his dogs, and his active outdoor adventures, among other things. He was also a very attentive listener, and took genuine interest in our history. He made a concerted effort to better understand our preferences, concerns, wants, and needs, and did so while concurrently, and effectively, navigating the negotiations, and needs of the process, to keep everything moving forward, and on track, to meet time sensitive deadlines.
It is our pleasure, then, to offer this testimonial on behalf of Fountainhead Commercial, and Mr. Lowrey Burnett. If you need to complete a 1031 Exchange, you will be in good hands with Mr. Burnett, and would be wise to have him on your team.”
David & Florie Kuperman
Reach out to our 1031 experts today
If you’re interested in executing a 1031 exchange, reach out to us at Fountainhead Commercial. Our 1031 exchange experts are here to ensure a smooth and successful transaction every time.
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