Tenant Description
ProsCons
  • Industry-leading investment-grade credit
  • Compressed cap rates
  • Rental escalations in base term
  • New lease terms are usually flat for first 10 years
  • Low price point relative to similarly strong investment-grade tenants
  • Investor unable to depreciate improvements in ground leases
  • Absolute NNN ground leases with zero landlord responsibilities
  • Many deals located in tertiary markets with limited long-term appreciation potential
  • Widely considered "recession proof"
    and "Amazon proof"
  • Industry-leading market share and track record of profitability
  • McDonald’s is still the dominant player among quick-service restaurants in the United States market from a volume perspective, enjoying an industry-leading market share of approximately 17%. The iconic fast-food chain has over 36,000 locations around the world, including more than 14,000 locations in the U.S. It finished 2016 with annual sales revenue of $24.62 billion and $9.34 billion in earnings.

    Since CEO Steve Easterbrook took the top job in March of 2015, McDonald’s Corporation has launched an aggressive turnaround plan with the goal of being recognized by customers as a modern and progressive burger company. The Company prioritized fewer, more strategic initiatives that focused on running better restaurants, driving operational growth, and returning excitement to the brand. It adapted to changing consumer tastes by launching all-day breakfast, switching to never-frozen beef for its Quarter Pounders, offering mobile ordering through its smartphone app, and even partnering with Uber Eats to offer food delivery in major markets where almost 75% of the population live with three miles of a McDonald’s restaurant.

    As reflected by improved customer satisfaction measures and same-store sales revenues across most of the major markets, customers have taken notice. The company showed continued strong results in its latest quarter (Q2 2017) with comparable-restaurant sales growth of 6.6% and net income up 28% year over year to $1.39 billion. McDonald’s commitment to quality, convenience, and value combined with a willingness to innovate will ensure the Company’s success for decades to come.

    The McDonald’s business model does not rely purely on fast food sales. The company is primarily a franchisor, with approximately 85% of McDonald’s restaurants currently owned and operated by independent franchisees. Franchisees are required to meet rigorous standards and the company generally does not work with passive investors.

    McDonald’s owns and leases real estate primarily in connection with its restaurant business. It believes that co-investment with its franchisees produces the best long-term results. The Company identifies and develops sites that offer long-term sales and profit potential to the company. To assess potential, McDonald’s analyzes traffic and walking patterns, census data and other relevant data. The company prefers to own the land and buildings of its locations, but is happy to secure long-term ground leases with land owners if it feels compelled to open a location at a particular site.

    Check out full site criteria for McDonald’s free-standing restaurants in the table on the right.

    Development Criteria Highlights:

    • 50,000 +/- square feet of Land
    • Corner or corner wrap w/signage on two major streets.
    • Signalized intersection.
    • Ability to build up to 4,000 sq. ft.
    • Parking to meet all applicable codes.
    • Ability to build to a minimum height of 23’4″.



    Average Cap Rate
    4.27%
    National 12-mo avg. with 10+ year lease term
    (Source: CoStar & proprietary comp data -
    updated quarterly)
    Credit Rating
    BBB+
    Baa1
    Standard & Poor's
    Moody's
    Company Snapshot
    Company Name

    McDonalds Corp.

    Ownership Type

    Public

    Stock Symbol

    NYSE:MCD

    Headquarters

    Oak Brook, IL

    Locations Worldwide

    37,000+

    Locations in the U.S.

    14,000+

    Website

    mcdonalds.com

    Average Property & Lease
    Sales Price

    $1,721,828

    Annual Base Rent

    $73,148

    Annual Rent PSF

    $15.89

    Building SF

    4,603

    Price PSF

    $374

    Lot Size

    1.15 Acres

    Ownership Interest

    Fee Simple Land
    (Ground Lease)

    Lease Structure

    Absolute NNN

    Lease Term

    20 Years

    Escalations

    10% Every 5 Years

    Guarantor

    McDonald's Corp.

    Site Criteria

    Click Here

    National 12-mo avg. with 10+ year lease term
    (Source: CoStar & proprietary comp data -
    updated quarterly)


    Source: Google Finance




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    Source: Google Finance

    In Millions of USD (except for per share items) 3 months ending 2017-09-30 3 months ending 2017-06-30 3 months ending 2017-03-31 3 months ending 2016-12-31 3 months ending 2016-09-30
    Revenue 5,754.60 6,049.70 5,675.90 6,028.90 6,424.10
    Other Revenue, Total - - - - -
    Total Revenue 5,754.60 6,049.70 5,675.90 6,028.90 6,424.10
    Cost of Revenue, Total 2,937.10 3,341.30 3,246.50 3,470.70 3,677.10
    Gross Profit 2,817.50 2,708.40 2,429.40 2,558.20 2,747.00
    Selling/General/Admin. Expenses, Total 567.00 525.40 521.30 627.50 582.90
    Research & Development - - - - -
    Depreciation/Amortization - - - - -
    Interest Expense(Income) - Net Operating - - - - -
    Unusual Expense (Income) -798.00 -82.80 -85.00 -8.70 53.50
    Other Operating Expenses, Total - - - - -
    Total Operating Expense 2,675.20 3,754.60 3,641.90 4,059.90 4,286.80
    Operating Income 3,079.40 2,295.10 2,034.00 1,969.00 2,137.30
    Interest Income(Expense), Net Non-Operating - - - - -
    Gain (Loss) on Sale of Assets - - - - -
    Other, Net -14.30 -6.90 -8.00 -11.70 -6.10
    Income Before Tax 2,819.50 2,061.40 1,807.50 1,734.90 1,904.50
    Income After Tax 1,883.70 1,395.10 1,214.80 1,193.40 1,275.40
    Minority Interest - - - - -
    Equity In Affiliates - - - - -
    Net Income Before Extra. Items 1,883.70 1,395.10 1,214.80 1,193.40 1,275.40
    Accounting Change - - - - -
    Discontinued Operations - - - - -
    Extraordinary Item - - - - -
    Net Income 1,883.70 1,395.10 1,214.80 1,193.40 1,275.40
    Preferred Dividends - - - - -
    Income Available to Common Excl. Extra Items 1,883.70 1,395.10 1,214.80 1,193.40 1,275.40
    Income Available to Common Incl. Extra Items 1,883.70 1,395.10 1,214.80 1,193.40 1,275.40
    Basic Weighted Average Shares - - - - -
    Basic EPS Excluding Extraordinary Items - - - - -
    Basic EPS Including Extraordinary Items - - - - -
    Dilution Adjustment - - - - -
    Diluted Weighted Average Shares 813.50 819.20 825.20 829.40 847.70
    Diluted EPS Excluding Extraordinary Items 2.32 1.70 1.47 1.44 1.50
    Diluted EPS Including Extraordinary Items - - - - -
    Dividends per Share - Common Stock Primary Issue 0.94 0.94 0.94 0.94 0.89
    Gross Dividends - Common Stock - - - - -
    Net Income after Stock Based Comp. Expense - - - - -
    Basic EPS after Stock Based Comp. Expense - - - - -
    Diluted EPS after Stock Based Comp. Expense - - - - -
    Depreciation, Supplemental - - - - -
    Total Special Items - - - - -
    Normalized Income Before Taxes - - - - -
    Effect of Special Items on Income Taxes - - - - -
    Income Taxes Ex. Impact of Special Items - - - - -
    Normalized Income After Taxes - - - - -
    Normalized Income Avail to Common - - - - -
    Basic Normalized EPS - - - - -
    Diluted Normalized EPS 1.66 1.63 1.40 1.43 1.55
    In Millions of USD (except for per share items) 12 months ending 2016-12-31 12 months ending 2015-12-31 12 months ending 2014-12-31 12 months ending 2013-12-31
    Revenue 24,621.90 25,413.00 27,441.30 28,105.70
    Other Revenue, Total - - - -
    Total Revenue 24,621.90 25,413.00 27,441.30 28,105.70
    Cost of Revenue, Total 14,417.20 15,623.80 16,985.60 17,203.00
    Gross Profit 10,204.70 9,789.20 10,455.70 10,902.70
    Selling/General/Admin. Expenses, Total 2,410.50 2,473.20 2,511.40 2,407.40
    Research & Development - - - -
    Depreciation/Amortization - - - -
    Interest Expense(Income) - Net Operating - - - -
    Unusual Expense (Income) 130.50 62.60 9.70 -169.00
    Other Operating Expenses, Total - - - -
    Total Operating Expense 16,877.40 18,267.50 19,492.10 19,341.40
    Operating Income 7,744.50 7,145.50 7,949.20 8,764.30
    Interest Income(Expense), Net Non-Operating - - - -
    Gain (Loss) on Sale of Assets - - - -
    Other, Net -21.70 -16.50 -6.70 -44.90
    Income Before Tax 6,866.00 6,555.70 7,372.00 8,204.50
    Income After Tax 4,686.50 4,529.30 4,757.80 5,585.90
    Minority Interest - - - -
    Equity In Affiliates - - - -
    Net Income Before Extra. Items 4,686.50 4,529.30 4,757.80 5,585.90
    Accounting Change - - - -
    Discontinued Operations - - - -
    Extraordinary Item - - - -
    Net Income 4,686.50 4,529.30 4,757.80 5,585.90
    Preferred Dividends - - - -
    Income Available to Common Excl. Extra Items 4,686.50 4,529.30 4,757.80 5,585.90
    Income Available to Common Incl. Extra Items 4,686.50 4,529.30 4,757.80 5,585.90
    Basic Weighted Average Shares - - - -
    Basic EPS Excluding Extraordinary Items - - - -
    Basic EPS Including Extraordinary Items - - - -
    Dilution Adjustment - - - -
    Diluted Weighted Average Shares 861.20 944.60 986.30 1,006.00
    Diluted EPS Excluding Extraordinary Items 5.44 4.79 4.82 5.55
    Diluted EPS Including Extraordinary Items - - - -
    Dividends per Share - Common Stock Primary Issue 3.61 3.44 3.28 3.12
    Gross Dividends - Common Stock - - - -
    Net Income after Stock Based Comp. Expense - - - -
    Basic EPS after Stock Based Comp. Expense - - - -
    Diluted EPS after Stock Based Comp. Expense - - - -
    Depreciation, Supplemental - - - -
    Total Special Items - - - -
    Normalized Income Before Taxes - - - -
    Effect of Special Items on Income Taxes - - - -
    Income Taxes Ex. Impact of Special Items - - - -
    Normalized Income After Taxes - - - -
    Normalized Income Avail to Common - - - -
    Basic Normalized EPS - - - -
    Diluted Normalized EPS 5.55 4.84 4.83 5.44
    In Millions of USD (except for per share items) As of 2017-09-30 As of 2017-06-30 As of 2017-03-31 As of 2016-12-31 As of 2016-09-30
    Cash & Equivalents 2,671.20 2,392.40 2,412.20 1,223.40 2,266.70
    Short Term Investments - - - - -
    Cash and Short Term Investments 2,671.20 2,392.40 2,412.20 1,223.40 2,266.70
    Accounts Receivable - Trade, Net 1,569.00 1,457.30 1,336.70 1,474.10 1,349.80
    Receivables - Other - - - - -
    Total Receivables, Net 1,569.00 1,457.30 1,336.70 1,474.10 1,349.80
    Total Inventory 54.20 56.70 56.80 58.90 90.50
    Prepaid Expenses 495.90 597.50 552.00 565.20 595.10
    Other Current Assets, Total 0.00 1,388.60 1,549.50 1,527.00 -
    Total Current Assets 4,790.30 5,892.50 5,907.20 4,848.60 4,302.10
    Property/Plant/Equipment, Total - Gross 36,038.90 35,397.90 34,451.50 34,443.40 37,931.10
    Accumulated Depreciation, Total -14,060.30 -13,708.60 -13,237.40 -13,185.80 -14,945.40
    Goodwill, Net 2,373.30 2,345.20 2,299.20 2,336.50 2,504.70
    Intangibles, Net - - - - -
    Long Term Investments 999.80 779.70 766.50 725.90 878.00
    Other Long Term Assets, Total 2,417.60 2,078.50 1,933.30 1,855.30 1,816.40
    Total Assets 32,559.60 32,785.20 32,120.30 31,023.90 32,486.90
    Accounts Payable 685.20 536.00 678.40 756.00 852.20
    Accrued Expenses 1,694.10 1,456.50 1,430.10 1,673.10 2,290.30
    Notes Payable/Short Term Debt 0.00 0.00 0.00 0.00 0.00
    Current Port. of LT Debt/Capital Leases 215.80 209.90 222.90 77.20 -
    Other Current liabilities, Total 1,145.10 540.90 889.30 962.00 1,334.20
    Total Current Liabilities 3,740.20 2,743.30 3,220.70 3,468.30 4,476.70
    Long Term Debt 28,402.60 28,150.90 26,984.20 25,878.50 26,007.00
    Capital Lease Obligations - - - - -
    Total Long Term Debt 28,402.60 28,150.90 26,984.20 25,878.50 26,007.00
    Total Debt 28,618.40 28,360.80 27,207.10 25,955.70 26,007.00
    Deferred Income Tax 1,602.10 1,661.70 1,807.20 1,817.10 1,378.80
    Minority Interest - - - - -
    Other Liabilities, Total 2,292.30 2,229.90 2,139.00 2,064.30 2,248.50
    Total Liabilities 36,037.20 34,785.80 34,151.10 33,228.20 34,111.00
    Redeemable Preferred Stock, Total - - - - -
    Preferred Stock - Non Redeemable, Net 0.00 0.00 0.00 - -
    Common Stock, Total 16.60 16.60 16.60 16.60 16.60
    Additional Paid-In Capital 6,994.10 6,916.70 6,809.60 6,757.90 6,712.80
    Retained Earnings (Accumulated Deficit) 47,631.50 47,300.60 46,666.90 46,222.70 45,030.00
    Treasury Stock - Common -55,883.10 -53,748.10 -52,818.90 -52,108.60 -50,760.90
    Other Equity, Total -2,236.70 -2,486.40 -2,705.00 -3,092.90 -2,622.60
    Total Equity -3,477.60 -2,000.60 -2,030.80 -2,204.30 -1,624.10
    Total Liabilities & Shareholders' Equity 32,559.60 32,785.20 32,120.30 31,023.90 32,486.90
    Shares Outs - Common Stock Primary Issue - - - - -
    Total Common Shares Outstanding 797.20 810.00 815.00 819.30 830.40
    In Millions of USD (except for per share items) As of 2016-12-31 As of 2015-12-31 As of 2014-12-31 As of 2013-12-31
    Cash & Equivalents 1,223.40 7,685.50 2,077.90 2,798.70
    Short Term Investments 144.40 4.50 137.90 16.00
    Cash and Short Term Investments 1,367.80 7,690.00 2,215.80 2,814.70
    Accounts Receivable - Trade, Net 1,474.10 1,298.70 1,214.40 1,319.80
    Receivables - Other - - - -
    Total Receivables, Net 1,474.10 1,298.70 1,214.40 1,319.80
    Total Inventory 58.90 100.10 110.00 123.70
    Prepaid Expenses 388.10 499.20 562.20 763.60
    Other Current Assets, Total 1,559.70 55.00 83.10 28.30
    Total Current Assets 4,848.60 9,643.00 4,185.50 5,050.10
    Property/Plant/Equipment, Total - Gross 34,443.40 37,692.40 39,126.10 40,355.60
    Accumulated Depreciation, Total -13,185.80 -14,574.80 -14,568.60 -14,608.30
    Goodwill, Net 2,336.50 2,516.30 2,735.30 2,872.70
    Intangibles, Net - - - -
    Long Term Investments 725.90 792.70 1,004.50 1,209.10
    Other Long Term Assets, Total 1,855.30 1,869.10 1,744.60 1,747.10
    Total Assets 31,023.90 37,938.70 34,227.40 36,626.30
    Accounts Payable 756.00 874.70 860.10 1,086.00
    Accrued Expenses 1,669.20 1,892.90 1,712.90 1,815.90
    Notes Payable/Short Term Debt 0.00 0.00 0.00 0.00
    Current Port. of LT Debt/Capital Leases 77.20 - - -
    Other Current liabilities, Total 965.90 182.80 174.90 268.10
    Total Current Liabilities 3,468.30 2,950.40 2,747.90 3,170.00
    Long Term Debt 25,878.50 24,122.10 14,935.70 14,129.80
    Capital Lease Obligations - - - -
    Total Long Term Debt 25,878.50 24,122.10 14,935.70 14,129.80
    Total Debt 25,955.70 24,122.10 14,935.70 14,129.80
    Deferred Income Tax 1,817.10 1,704.30 1,624.50 1,647.70
    Minority Interest - - - -
    Other Liabilities, Total 2,064.30 2,074.00 2,065.90 1,669.10
    Total Liabilities 33,228.20 30,850.80 21,374.00 20,616.60
    Redeemable Preferred Stock, Total - - - -
    Preferred Stock - Non Redeemable, Net - - - -
    Common Stock, Total 16.60 16.60 16.60 16.60
    Additional Paid-In Capital 6,757.90 6,533.40 6,239.10 5,994.10
    Retained Earnings (Accumulated Deficit) 46,222.70 44,594.50 43,294.50 41,751.20
    Treasury Stock - Common -52,108.60 -41,176.80 -35,177.10 -32,179.80
    Other Equity, Total -3,092.90 -2,879.80 -1,519.70 427.60
    Total Equity -2,204.30 7,087.90 12,853.40 16,009.70
    Total Liabilities & Shareholders' Equity 31,023.90 37,938.70 34,227.40 36,626.30
    Shares Outs - Common Stock Primary Issue - - - -
    Total Common Shares Outstanding 819.30 906.80 962.90 990.40
    In Millions of USD (except for per share items) 9 months ending 2017-09-30 6 months ending 2017-06-30 3 months ending 2017-03-31 12 months ending 2016-12-31
    Net Income/Starting Line 4,493.60 2,609.90 1,214.80 4,686.50
    Depreciation/Depletion 1,020.60 664.80 325.30 1,516.50
    Amortization - - - -
    Deferred Taxes 375.60 150.50 85.90 -538.60
    Non-Cash Items -1,049.50 -144.70 -90.00 228.20
    Changes in Working Capital -398.40 -523.10 8.00 167.00
    Cash from Operating Activities 4,441.90 2,757.40 1,544.00 6,059.60
    Capital Expenditures -1,213.30 -796.40 -427.70 -1,821.10
    Other Investing Cash Flow Items, Total 2,379.30 787.70 565.80 839.50
    Cash from Investing Activities 1,166.00 -8.70 138.10 -981.60
    Financing Cash Flow Items -1.10 -4.60 -6.50 -3.00
    Total Cash Dividends Paid -2,287.40 -1,532.10 -770.60 -3,058.20
    Issuance (Retirement) of Stock, Net -3,564.30 -1,565.10 -631.80 -10,871.60
    Issuance (Retirement) of Debt, Net 1,289.10 1,348.10 821.70 2,670.40
    Cash from Financing Activities -4,563.70 -1,753.70 -587.20 -11,262.40
    Foreign Exchange Effects 229.60 153.40 54.70 -103.70
    Net Change in Cash 1,273.80 1,148.40 1,149.60 -6,288.10
    Cash Interest Paid, Supplemental - - - -
    Cash Taxes Paid, Supplemental - - - -
    In Millions of USD (except for per share items) 12 months ending 2016-12-31 12 months ending 2015-12-31 12 months ending 2014-12-31 12 months ending 2013-12-31
    Net Income/Starting Line 4,686.50 4,529.30 4,757.80 5,585.90
    Depreciation/Depletion 1,516.50 1,555.70 1,644.50 1,585.10
    Amortization - - - -
    Deferred Taxes -538.60 -1.40 -90.70 25.20
    Non-Cash Items 228.20 287.60 482.30 115.90
    Changes in Working Capital 167.00 167.90 -63.60 -191.40
    Cash from Operating Activities 6,059.60 6,539.10 6,730.30 7,120.70
    Capital Expenditures -1,821.10 -1,813.90 -2,583.40 -2,824.70
    Other Investing Cash Flow Items, Total 839.50 393.90 278.50 150.90
    Cash from Investing Activities -981.60 -1,420.00 -2,304.90 -2,673.80
    Financing Cash Flow Items -3.00 -7.60 58.10 80.80
    Total Cash Dividends Paid -3,058.20 -3,230.30 -3,216.10 -3,114.60
    Issuance (Retirement) of Stock, Net -10,871.60 -5,782.00 -2,963.20 -1,544.50
    Issuance (Retirement) of Debt, Net 2,670.40 9,755.20 1,502.90 535.30
    Cash from Financing Activities -11,262.40 735.30 -4,618.30 -4,043.00
    Foreign Exchange Effects -103.70 -246.80 -527.90 58.70
    Net Change in Cash -6,288.10 5,607.60 -720.80 462.60
    Cash Interest Paid, Supplemental 873.50 640.80 573.20 532.70
    Cash Taxes Paid, Supplemental 2,387.50 1,985.40 2,388.30 2,546.00

    Source: Google Finance