Investor demand for net-lease quick-service restaurant (QSR) properties is hotter than an order of McDonald’s French fries. The price point, coupled with long-term leases, rental escalations and recognizable brand names, makes these QSR properties an attractive investment, particularly for 1031 exchange investors.
“This is the peak of the bestseller’s market in over 10 years,” notes Rick Fernandez, managing director of Calkain Cos. Urban Investment Advisors. “1031 exchange buyers, low interest rates and a lack of quality available product have all served to drive down cap rates.”
The current pricing environment has encouraged both corporations and franchisees to unlock the value of their owned real estate. They are using the proceeds to expand, remodel existing locations and pay down existing debt. Multi-unit franchise operators are particularly interesting in doing sale-leasebacks because the deals can fund upgrades and renovations required by the brands.