November Capital / August 1, 2024
NNN Lease McDonald’s sells in Canton, Georgia at a 5.22% Cap Rate
Written by Jeffrey Weil, President and Founder of November Capital
According to CoStar, a net leased McDonald’s asset sold for $2.2M or a 5.22% cap rate. The deal finished up on June 27, 2024. The ground lease had 7 years of term remaining. The net operating income on the asset is $114,950.
The McDonald’s ground leased asset is a pad to a Lowe’s, Kohl’s and Target anchored center. Easily accessible from Interstate 575 and 40 miles north of downtown Atlanta.
Pricing
The 5.22% cap rate represents a great yield for a McDonald’s investor. Most McDonald’s NNN assets trade below 5.00%. Given the lease has only 7 years remaining the buyer was able to capture a higher yield.
Most new construction McDonald’s assets trade between a 3.75%-4.50% cap rate.
Lease Structure
Like mostly all McDonald’s, this asset is under a NNN ground lease. This means the owner has zero maintenance obligations to the property. McDonald’s – the tenant – takes care of every aspect. HVAC, parking lot, roof, structure – McDonald’s repairs it all. This presents a true coupon clipper and passive real estate investment. Finally – the lease carries a corporate guarantee. Fantastic.
Deal Story
I like McDonald’s NNN assets for investors that don’t want to worry about managing real estate. Investment grade credit, strong location, traffic, demographics, lease structure – this allows ownership (usually a 1031 buyer) to sleep well at night. As worry free as it gets. The short term lease puts a little risk on the deal – but that’s why the buyer got a better yield.
This is an article for informational purposes only. November Capital takes no claim to this transaction.
