KFC, Erlanger, KY
April 30, 2019
Help with a New NNN Investment from a Trusted Buyer’s Advisor
A married couple in Virginia with an IT background wanted to invest in a triple-net lease property. Being new to the NNN market with zero knowledge of this type of investment, they looked at properties online, tried to educate themselves, and finally reached out to Westwood Net Lease Advisors.
Westwood Advisor Chris Schellin had many conversations with them and provided in-depth industry knowledge to help them make an educated purchase. After a month of sending 30-40 properties and getting better acquainted, we discovered the retailers they were originally interested in did not fit their needs. We narrowed down exactly what they needed versus what they thought they wanted. It came down to zero involvement as property owners.
Largest National Franchisee
In the end, they decided to move ahead with searching for a fast-food property because of the absolute NNN aspect. Westwood was able to source a KFC leased to the largest franchisee in the country with a good price point. The benefits of leasing to this experienced franchisee, who owns 680 units (the average is 30-40), provided a favorable opportunity. We researched and asked for store sales and performance, which is critical to making a wise NNN investment, and ensured it was a financially secure, well-established restaurant. We felt it was a perfect match.
“A great location coupled with strong sales are key for a fast-food property, over-and-above cap rate and length of lease. Over time, franchisees will come and go. If it’s a prime location with strong sales numbers and the franchisee fails, corporate or another franchisee will most than likely take it over. If it’s a less-than-prime location with below average sales, there’s a higher risk of vacancy.” – Chris Schellin, President/Principal, Westwood Net Lease Advisors
Verify Location Sales Numbers
Throughout the process, we ensured everything met our strict requirements for a good investment, and more importantly, was in the best interests of our buyers. First-and-foremost, before a letter of intent (LOI) was ever written, we required the franchisee to provide a history of store sales and performance. We also confirmed there was a lease clause stating that the tenant would supply ongoing sales and performance numbers throughout the lease period.
Without exception, Westwood Advisors insist upon verifying sales numbers for our clients – it is of utmost importance – before tenant financials, cap rate, and analysis of the real estate. A good portion of buyers and their attorneys don’t ask for proof of sales. They assume, because most tenants are credit-worthy corporations, sales must be strong. This is not always the case and can lead to a less-than-ideal investment.
A Great NNN Investment & Money Leftover
Once we presented the LOI, we were highly involved in the rest of the process. We sourced their debt financing through a lender we work with regularly. The buyers received a below-market interest rate and saved up-front loan costs. We sourced the attorney and worked with them every step of the way to ensure they had the best investment experience possible. They ended up with a 20-year lease at a 5.75% cap rate and money left over, which they plan to use later this year for a second property.
To Wrap it Up – Even if You’re New to NNN, You Can Invest with Confidence
Not only do we work the real estate side of NNN investments, we advise and assist throughout the entire process. We ensure all buyers – new and seasoned – know every detail to make an educated decision, including the negatives and the positives, in every potential investment. This empowers our clients to go forward with confidence. Contact Chris, at 314-563-2208 or the team at Westwood today – we can simplify your NNN lease buying experience and help you invest in the property that’s right for you. 314-997-5227.