June 19, 2018
Thanks in part to its e-commerce resistance, the single-tenant casual dining sector remains a favorite among investors, and that momentum is expected to continue throughout 2018, according to the Boulder Group. Private investors, whose yield requirements aren’t the same as those for institutional buyers, dominated casual-dining trades in 2017, and are expected to continue doing so.
The Boulder Group sees a couple of evolving trends in these transactions. One is widening cap rates: an average of 6.05% in the first quarter of this year, up five basis points from Q1 2017.
Cap rates remain narrower for casual dining properties backed by corporate guarantees: an average of 5.9% in Q1, compared to 6.5% for franchise-guaranteed assets. That underpins a trend of increasing emphasis on corporately-guaranteed properties in the supply, representing 75% of the properties in Q1, compared to 51% a year ago.
Among restaurant brands, Red Lobster locations had the highest median asking price in Q1 at $4.5 million. At the other end of the spectrum were Texas Roadhouse locations, which came in at a median of just under $2.1 million.
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