MIAMI—The triple net action continues in South Florida as Calkain Companies brokers the sale of a ground leased McDonald's in Palm Beach County. The McDonald's has been at the 1450 West Lantana Road site since 1979.
According to Calkain, the tenant has displayed a history of activity, showing confidence in the location through lease renewals and extensive renovations. That helped the triple net specialist to drive a sales price reflective of a 4.25% cap rate despite the pending expiration of the lease in less than eight years.
Calkain vice president Michael Zimmerman and managing partner Patrick Nutt exclusively represented the seller, a local Florida investment group. The duo says the demand for net lease assets remains high, especially those with investment rated tenants, like McDonald's, which carries a Standard & Poor's A rating.
“The market usually discounts shorter leases by 25-200 basis points,” Zimmerman says. His team, he adds, was able to help investors “understand the high barriers to entry for a relocation store, effectively locking the tenant into their current location indefinitely.”
During the transaction, McDonald's exercised its Right of First Refusal to purchase the store, ultimately becoming the buyer of the location rather than the private individual that had the winning offer. The sale was structured to pay down debt on the newly acquired shopping center that surrounds this asset.
“It was a great opportunity for the seller to capture hidden equity from their shopping center by selling this outparcel, a piece that added nominally to the center's NOI, but the sale of which adds significantly to their overall return,” Nutt says.
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