Tenant Description

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.

Real Estate Summary

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.

PROSCONS
  • Industry-leading investment-grade credit
  • Compressed cap rates due to high investor demand
  • Rental escalations in base term
  • Generally high rental rates PSF that could prove hard to replace in the event 7-Eleven vacates
  • Low price point relative to similarly strong investment-grade tenants
  • Investor unable to depreciate improvements in ground-leased locations
  • Predominantly Absolute to Modified NNN ground leases with zero to limited landlord responsibilities
  • Widely considered "recession proof"
    and "Amazon proof"
  • Industry-leading market share and track record of profitability
  • Predominantly corner locations in urban markets with excellent demographics and population density
  • One of the lowest relocation rates in the net lease industry
  • 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.
    (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.

    National 12-mo avg.
    (Source: CoStar & proprietary comp data -
    updated quarterly)