NNN Loan Requirements

[Matthew Nesbit]

I haven't seen much information regarding the borrower's requirements for NNN loans, specifically fast food retail on urban/suburban properties. So far for Dollar General properties, I've gathered that typical LTV is 35%-40% due to their rural locations. I understand that generally your net worth should be at least the loan value and you must have at least 10% liquidity from the loan value.

If anyone can shed some light on loan requirements (mainly LTV, is 25% down payment possible for this?) for fast food retail, that would be great!

[Jacob Franz]

Kevin is right on with typical financing terms for these DG deals. I just closed a deal for a well-located Dollar General in a secondary market with ten-years of term remaining. The lender did 75% LTV, 3.95% interest on a 10-year term, with a 25 year AM and personal guarantees from the purchasers - both of whom had solid personal financial statements. The more rural a property gets, the less interest there is going to be in financing it. Likewise, the shorter the lease term remaining, the harder it will be to finance.

Fast food restaurants are going to very substantially depending on the term and strength of the lease. You likely would have a hard time financing a mom-and-pop restaurant without a high LTV as there is no credit behind the lease. On the other hand, you aren't going to have any issues financing a Chipotle or Starbucks as long as there is sufficient term remaining. One of the tricky areas in the restaurant space is that many of the larger chains are franchisee owned (Taco Bell, IHOP, etc.). The financing terms will be impacted by the strength of that franchisee.

I am happy to jump on a call if you want to discuss in greater detail or if you are looking for some commercial investment options.