In early 2024, a repeat client of ours approached our team here at Westwood in search of a high-quality NNN lease investment. With our client’s strong background in commercial real estate and interest in essential-service tenants, he was particularly drawn to the childcare sector. After a year-long search and multiple offers, Jason Simon of the Westwood team helped him close on a newly built Busy Bees Learning Center in Queen Creek, Arizona — an area of the country undergoing rapid population growth and increasing demand for early education.
About the Property & Tenant
The investment was a pre-construction childcare facility with a brand-new 15-year NNN lease and 10% rent escalations every five years. Busy Bees, a growing and strong operator in the early childhood education space, offered our client the perfect blend of long-term stability and yield.
The Market Advantage
Our advisors often emphasize the importance of market fundamentals—population growth, income levels, and essential services—and this property checked every box.
Queen Creek, located southeast of Phoenix, is experiencing a projected 10% population increase over the next five years. With an average household income of $115,000, the market shows clear indicators of sustained demand for premium childcare services.
The Numbers
- Purchase Price: Just over $8 million
- Cap Rate: 6.75%
- Financing: 35% cash, 65% financing
- Interest Rate: 6.25% (locked in early)
Thanks to our team’s timely action, our client was able to secure a 6.25% interest rate, just before rates increased nearly 100 basis points. This strategic timing allowed for a favorable spread between the interest rate and cap rate, a critical factor in any successful NNN investment.
The Journey to Purchase
Our client submitted offers on multiple properties throughout 2024. For this particular Busy Bee property, another buyer submitted a competing offer with a higher purchase price, However, through our team’s strategic negotiations and expert guidance, we were able to win over the deal for the client.
The property was under construction at the time of the contract in October 2024 and closed in January 2025. Construction costs, which had previously been volatile, came in on the lower end of projections—thanks in part to declining hard costs (materials, labor, land acquisition). Our advisors helped manage due diligence and expectations for our client throughout the construction phase.
Why This Deal Worked
This deal succeeded because of three key elements: a high-growth market, a reliable tenant, and a favorable cap rate in a rising interest rate environment.
Childcare is becoming a popular category for NNN investors due to its resilience, essential nature, and higher-than-average returns. In fact, leases in this category often offer 7.00%+ cap rates.
Despite today’s challenges in penciling deals due to interest rate pressure, cash and low-leverage buyers are in a strong position. With treasury yields trending downward and cap rates remaining high, there is a narrow but valuable window for savvy investors to take advantage of long-term yield compression.
Westwood continues to see strong investor interest in childcare NNN assets. And for good reason. For investors seeking higher returns in a relatively low-risk tenant category, deals like this Busy Bees Learning Center stand out.
Contact our team today to learn more about investing in a NNN lease childcare property today!
