Blog / Triple Net Property

This section features past triple net investment offering recommendations we've made.


Mauna Loa Macadamia Nut Farm

[This offering is fully subscribed. This is provided as an example of one of the offerings our affiliates have recommended to clients in the past.]

Description:

This was an exclusive investment offering created for and provided only to the clients and referrals of a Gateway affiliate firm. It is a fee-simple ownership of a 736 acre macadamia nut orchard located on Hawaii’s big island. The orchard’s income to the owners was backed by an absolute triple-net lease guaranteed by Mauna Loa, which was acquired by Hershey’s in 2004. The lease had 12 years remaining at the time of acquisition with two 10% rent increases and a 10-year annualized net cash flow to investors ranging from 7.17% to 8.18%.


Tax-Benefits:

We had the investment structured as a tenant-in-common offering to allow both 1031 exchange and cash investors to participate. Since the investors in the offering own not only the land but also the macadamia nut trees on the land, they have had the ability to utilize a 10-year depreciation schedule against the value of the trees. For an investor with new basis in the property, this means they were able to shelter all of their income from the investment and provide an additional annual accounting loss of 6-8% on their equity investment.  This drove the annual taxable equivalent yield for investors to approximately 10%.


Goals:

  1. Consistent longer-term income backed by strong corporate credit.
  2. Significant tax-savings as a strong 1031 exchange option and as an option for income-tax deferral based on the special depreciation allowance for orchards.
  3. Potential long-term upside for a sale or increase in income based on the value of the income provided by the annual macadamia nut crop yield, contracted rental increases, and a possible extended net-leased renewal from Mauna Loa. 


Status:

This property continues to perform exactly as expected, providing steady, monthly income just as projected. Individual investors in the program have also been able to derive significant income-tax deferral due to the 10-year depreciation allowance for fruit- or nut-bearing agriculture. A portion of the orchard’s trees continue to be cycled each year to ensure that the orchard’s productive life is continually extended, preserving and adding value to the owner’s of this investment.


Cash Flow Return:

Year2009201020112012
Projected7.50%7.87%7.17%7.17%
Actual7.50%7.87%7.17%7.17%
Variance0.00%0.00%0.00%0.00%


 Total Return:

TBD – Not Yet Sold


[Past performance does not guarantee future results. This offering’s results are not necessarily indicative of future recommended offerings. Real Estate Investing is subject to risk, including, but not limited to potential disruptions in cash flow, loss of principal, illiquidity, etc.]

 

Written By: Staff




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