Owner User Purchase with a current tenant occupying the real estate

Executive Summary:

• We helped represent a client; who is a Jack in the Box Franchisee; they were looking to purchase as an owner user. The building we purchased was an open and operating Burger King; this market is a VOID for Jack in the Box and its franchisee.

Background:‍

• 1645 Heartwood Dr, McKinleyville CA was a property that softly hit the market. I knew the market extremely well as it is quite remote and only a handful of restaurant operators would be suitable to purchase the property.

Challenges:

• The building was currently occupied and on the market for an aggressive cap rate. We also knew there was a handful of other buyers interested in the property as an investment or to potentially occupy.

Approach:

• Due to its remote location we had to tell the store of why our buyer was the ideal owner user/buyer. We were one of the few people to be able to take it down successful and has a track record in the area.
• Given my relationship with the current tenant in the building I knew they didn’t want to stay forever; so we wanted to occupy the building when we were ready. This negotiation happened with myself, buyer and existing tenant during the due diligence phase.

Solution:

• Due to the quick nature of the sale we had to provide cash as well as a portion of seller carry for a short term.
• My client had to wait over 6 months before wanting to occupy the building. Wewere able to work on terms of a buyout during the PSA stage that would work for both the current tenant and buyer. We also allowed the tenant to pay less rent during that time, so everyone was happy.

Results:‍

• My client bought a building for an attractive basis in a very difficult market to enter. This will help operationally with their existing restaurants. The seller carry was also at an attractive rate in a market where interest rates were continually climbing.

Conclusion:

• Sometimes owner occupier deals aren’t always vacant. Tenants and buyers need to work with brokers who know the market, who is performing well or poorly and able to get creative to win deals.

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