DALLAS-A partnership located in the western United States has closed on the second of two acquisitions as part of a 1031 exchange. The recent buy was the 38,700-square-foot Northpoint III, a medical office building  leased by Texas Health Resources.

Financial specifics of the transaction were not disclosed, however, the buyer paid north of $5 million to seller Northpoint Dallas Investors LLC for the asset at 9250 Amberton Pkwy.  In mid-July, the buyer also bought an interest in the 587,528-square-foot Birmingham, AL Social Security Administration Building. Both transactions completed the $31 million 1031 exchange that was triggered from the $34 million sale of a western United States apartment building. Both assets carry triple net leases.

Bruce MacDonald, president of Net Lease Capital Advisors in Nashua, NH, says the buyer wanted to sell the apartment complex to take advantage of low cap rates but was reluctant to do so because of the capital gains taxes involved. Nor was the partnership interested in real estate requiring hands-on effort to maintain, says MacDonald, whose company advised the buyer throughout the process.

“They weren’t interested in a 1031 exchange initially,” MacDonald tells GlobeSt.com. “There wasn’t anything else they wanted to own.” However, when the buyer was introduced to the concept of net lease assets, the buyer changed its tune, and for good reason.

The medical office building in Dallas was acquired with a 6.5% cap rate and Texas Health Resources occupies the asset through a 15-year lease that commenced in 2011. Even better is that the lease deal averages a 8.2% over a 10-year term, with average bumps in the lease every 2.5 years or so. Meanwhile, the Birmingham office building is leased to the Social Security Administration through a 20-year lease.

“Not only did the buyer get into a fixed rate, he increased his yield over what he had with the apartments,” MacDonald remarked. “When the whole thing was done, the seller’s comment was that the original apartment building was never on the market for sale, but was glad it ended up being sold.” MacDonald adds that the buyer is interested in acquiring three additional net lease assets in the same geographical area as the just-acquired assets.