From Tenant to Triumph: Capture the Upside Potential with getting out of your location!

Executive Summary:

We represented a client looking to make a strategic approach to getting out of his owner-user property in Woodland, CA. The property, located at 85 W Court St, was occupied by an Arby’s franchisee. Our client recognized an opportunity to capture upside potential by getting out of his underperforming store and renting it to another higher performing tenant that could pay more rent or another owner user potential purchase the property. Through this we maximize the property’s long-term value.‍

‍Background:

85 W Court St, Woodland, CA, was a property with great visibility and accessibility, rare full basement and also had recently been redeveloped so basically everything was brand new. We knew the local market dynamics, including the competitive landscape for restaurants in the area, making this an appealing opportunity for a handful of potential QSR operators to establish a footprint on the West Side of Woodland and potentially reposition the property for the owner.

Challenges:

The property was occupied by Arby’s and had restrictions on the uses allowed on the property. They were no burgers, no chicken and no coffee allowed. All from the original sale by McDonalds, where they moved two doors down to a larger site. This put constraints on the users that we could target for the property.

Approach:

Our familiarity with the local area allowed us to effectively position our client for either a lease or potential for sale for an owner user; by offering both this widens our net of achieving the best outcome for the owner. Given the feedback from tenants and buyers we discussed both options to see what was the best for them and also our owner. We also worked closely with McDonalds to make sure we weren’t getting in the way of the restrictions as some potential tenants were borderline on the use restriction language.

Solution:

To expedite the transaction, we selected Taco Exxpress who is a strong local operator with very strong sales. They could move the quickest, didn’t require TI and had a strong rent to sales ratio which gave the owner piece of mind. This then would give the owner an opportunity to list the property as a brand-new investment sale deal with a 20-year lease.

‍Results:

Our client successfully leased the property and now we are on the market in the process of selling the property. A new buyer has the opportunity to acquire a prime location in Woodland at a favorable cap rate with immediate rental income from Taco Exxpress. The seller will put the funds earnt into a new concept he has signed on with.

Conclusion:

Owner-user deals are not always straightforward, especially when a property is tenant-occupied by a national franchisee. By working with brokers knowledgeable in market dynamics and who’s currently active we are able to address who are the most suitable replacements tenants for your property and have a strong understanding of what our clients should expect in annual rent, tenant allowance and exit price.