SINGLE TENANT ARBY’S (FRANCHISEE) WITH DRIVE-THRU
26,000+ cars per day (cpd) at the hard corner which the property occupies. Population within a one mile radius is approximately 9,000 and studies reveal over 29,000 people within a five minute drive. Average household income is more than $56,000/year. The property sits at the edge of Mobile’s downtown area, within a historic district, where a new drive-thru is very difficult to get approved. Our pre-acquisition studies showed no other drive-thru restaurant properties available for lease or sale in the trade area.
The property was occupied by a 50-unit operator Arby’s franchisee with less than two years remaining on their initial lease term. The over-market rental rates combined with poor sales performance by the tenant made this asset very risky for most single tenant investors. In addition, there were environmental considerations that required investigation and understanding. The property had been marketed aggressively for over eight months resulting in numerous canceled escrows for the seller. KJF Partners examined the local leasing market thoroughly to understand rental demand and rates for the property if the existing tenant chose to vacate the premises. KJF informed the seller that we understood the risks associated with the tenancy and that we would close on the property even if the existing tenant announced its intention to vacate the premises. We did determine the tenant would leave after their lease term expired and we closed without using that information to obtain a price reduction.
Result for our investors is a new 20-year lease executed with a 400+ unit operator of a national fast food chain at lease rates that will provide development level returns for this value-added turn around. Investors will receive stronger than expected passive cash flow and, because the tenant is doing a complete renovation of the property, the future value is enhanced significantly.