1. It looks like they will be selling a mix of properties, including some they have held for a long time. How much depreciation recapture will there be on the properties that are sold without exchanges and do they have any way to shelter that “income” from taxes?

2. With so many properties even after the portfolio is pruned, are they restricted to portfolio loans? What is the penalty in costs and rate if they are and what are the limits/ratios likely to be applied? In other words, how will the loan options available to them affect their purchases and exchanges?

3. It sounds like the Millers have not yet retired and can therefore rely on their earned income to help them qualify for financing. How would the scenario change if there was a job loss or early retirement that reduced or eliminated their earned income?

4. Over the two decade holding period, the income is likely to grow to the point the existing shelter is not big enough. Will these folks continue to move up over their retirement?

I completely agree with you about the triple net leased retailers. In my 25 plus years of experience, I have seen plenty of empty big boxes formerly occupied by what were considered class A tenants. In fact, if you see a major retailer trying to do a sale-leaseback of all their owned stores on Loopnet, you can be pretty sure that company needs to raise capital. K-Mart did that not long before they went under.

I’m even a little leery of Walgreens. There are plenty of vacant Walgreens and CVS stores in places that are overbuilt with retail centers. The typical Walgreens lease the last time I read one had a shorter initial term of 10 to 15 years (used to be 20 plus years) with a bunch of 5 year options. If you buy a 5 year old Walgreens with a 10 year initial term and the store goes dark, you could end up with a vacant store in a second class location in 5 years. I would research the area, the demographics, and the current and potential competition before I plunked down a dime of my money.

I like your idea of a collection of smaller properties. There are times when diversification can protect you, and this is one of them.