Searching for NNN single tenant property

[Robert Parker]

Hi BP forum,

Nothing like starting off my fist post on the million dollar question (literally)!

I have been searching for Single Tenant Absolute NNN deals for the last few weeks and have found the CAP rates nationally to have experienced tremendous downward pressure. I am looking for a $1.2-$1.6m property with a 6-6.75 CAP with AT LEAST a 10 yr term remaining on fast food restaurant locations in larger metropolitan areas ( >80,000 population in 5 miles) preferably in TX and FL but will consider nationwide.

The only tool I have really been using has been Loopnet. Are there other good sites I should be searching? It seems like all the big money has scrapped up anything decent and that the stuff that is left on Loopnet isn't that great...thoughts?

Thanks!

[Joel Owens]

Robert are you premium on Loopnet or basic??

Robert what is your plan for the asset??

1.2-.1.6 million Is very low for restaurants. Fast food is the only thing available in that range. Everyone wants the more than 10 years on primary term for security.

When getting LTV on these properties your returns will be based on the operator.

So fast food:

Let's take Taco Bell for instance.

Corp guarantee of all stores with location - best loans available

Subsidiary of corp say 300 taco bells guarantee that location you want to buy in that state. That is the next level down.

Large franchisee - next level down

Small franchisee or new franchisee - most risk

The lenders will require a higher DCSR and more down payment the lower you go. That affects returns immensely. So if you are not buying all cash then you have to look strongly at starting cap, guarantor of the lease, and rental increases annually in the primary term.

A small franchisee wanting a low cap with 1% annual increases Is crap to me because you will have to put 35% or so down to make a lender happy. Conversely if you can get 2 to 2.25 increase then the blended cap will rise nicely over time. So the deal can be overpriced depending on who is on the lease.

Some private sellers do not want to take the risk of underwriting a borrower and the loan falls through. Some people with 400k cash with a loan think they will be able to knock down to a strong cap. If the sellers wants to do that they already know groups of private partnerships and REIT's that will buy or cash all day long for extra yield. I can get it down some but not at an all cash level for my clients.

What is your expectation for cash on cash annually pre-tax?? I do have some sources but I have to see the buyers liquidity, net worth and that they are realistic before proceeding.