Thu, 21/09/2017 - 10:13
Four Corners Property Trust (FCPT), a real estate investment trust engaged in the ownership of high-quality, net-leased restaurant properties is to acquire 41 restaurant properties from Washington Prime Group (WPG) for a purchase price of approximately USD67.2 million in cash.
The transaction is priced at a cap rate consistent with our investment thresholds and past transactions and is expected to close in two tranches. The first tranche is expected to close in the fourth quarter of 2017, and the second tranche is expected to be completed in the first half of 2018, in each case, subject to due diligence and customary closing conditions. There is a separate individual lease for each property, and the leases have a current weighted average remaining term of approximately 8 years. In addition, well over half of the leases cover only the ground (ie, the tenant built its own building with ownership reverting to the landlord upon lease expiry), so the current rents are lower than if the rent had been set to cover both the land and the cost of the building.
The restaurant properties consist entirely of outparcels to WPG properties and are well located within highly trafficked retail corridors in Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Maryland, New Jersey, Ohio, Pennsylvania, Texas and Virginia. Approximately 83 per cent of the net operating income is from properties on out-lots to either open air or WPG’s “Tier One Enclosed” properties. None of the 41 restaurant properties or the adjacent WPG properties are currently encumbered by property-level debt.
In addition, the portfolio includes 22 different restaurant brands, 15 of which would be new to FCPT’s current portfolio. The 22 brands in the transaction include: McDonald’s (5 restaurants), Buffalo Wild Wings (4), Olive Garden (4), Taco Bell (4), BJ’s Restaurant (3), Red Lobster (3), Chick-Fil-A (2), Starbucks (2), and one each of Arby’s, Burger King, Cheddar’s, Chili’s, Checkers, IHOP, Outback Steakhouse, Panda Express, Panera Bread, Rally’s Hamburgers, Steak N’ Shake, Texas Roadhouse, Wendy’s and White Castle. Of the 41 leases, 32 are with corporate operators and 9 are with franchisees.
Bill Lenehan, CEO and Director of FCPT, says: “This transaction constitutes a unique opportunity for FCPT, offering diversity in geography, brand, lease maturity, operators and credit. The portfolio benefits from modest rents, a large majority of corporate operators and strong demographics and traffic counts. While many of the leases have a shorter lease term than those in our existing portfolio, we expect that the low rent-to-sales figures will increase the likelihood of renewal upon lease expiration.
“FCPT has significant cash on hand and an undrawn corporate revolver to finance this acquisition, and FCPT would still be well under its stated financial leverage limits pro forma for this acquisition.”
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