1031 Diary: Taco Casa, 8808 Barker Cypress Road
A Story of Long-Term Success: The 1031 Exchange
Historically, Beck-Reit has always set its sights on value-adding projects: finding properties that we could improve with the knowledge and resources at our disposal as a General Contractor. We started small, and began using the 1031 exchange to inch our way up from one development to the next around Austin. With value added each time, our investments consistently grew. But as the years have gone on, Austin’s market has exploded - making redevelopment plays for a company our size harder and harder to come by. In light of this, and paired with the material shortages and other supply-chain breakdowns of the past couple years, we’ve turned our eyes towards safe, stable, long-term investment properties for our recent 1031-exchanges.
Drive-Thru Capability was attractive to us in February of 2020, when pandemic uncertainty made “fast-casual” dining a precarious business
Our most recent acquisition, Taco Casa at 8808 Barker Cypress Rd in Cypress, Texas is a perfect example of one such investment. After selling our adaptive-reuse creative office space at 2131 Theo Drive, we were tasked with how to safely reinvest our proceeds. When we determined no reasonable development plays were available, we turned towards safe triple-net investment properties and quickly came upon this nugget.
37 Parking Spots on a nearly full acre lot!
8808 Barker Cypress Road:
4751 Sqft
Steel-Frame construction, built in 2017
37 Parking Spaces
Barker Cypress Rd Frontage (142ft)
NNN 10-Year Lease w/ 10-Year Option to Extend
Personally Guaranteed Lease
6% Cap Rate
Here are just a few of the reasons this Taco Casa caught our attention. We drove down to Houston to inspect the building personally, and found it was solid construction with minimal annual repair expenses to be expected. We reviewed the tenant’s lease and financials and felt secure in their ability to perform over the course of their lease. Next, it was on to evaluating the surrounding area.
Savy Investing: Looking for Site & Situation
When evaluating 8808 Barker Cypress Rd, we liked the quality of construction, the large parking lot, the cap-rate and the personal guarantee. Still, when considering an investment with a (potentially) 20-year lifespan, we felt we had to look beyond the property lines to feel confident enough to pull the trigger.
Lucky for us, the suburbs of Houston are booming. This Taco Casa is located near the intersection of three master-planned communities, a large community college and sports stadium. It’s also adjacent to several long-term leased community-centered businesses. The surrounding business mix - targeted to support a growing population of college students and young families - gave us confidence that our tenant would thrive despite seasonal economic changes and/or pandemic-related economic turbulence.
We ultimately decided to purchase 8808 Barker Cypress, and so far it has been a breeze of an investment. Minimal management obligations, zero maintenance or repair to date (knock on wood!), and consistent rent income. Compared to a ground-up development or gut-renovation, the risk is lower and reward, though perhaps not always greater, is more reliable and consistent. We look forward to many more investments like our Taco Casa in the future!