I'm looking for any first-hand experiences/horror stories on buying something like a Chick-fil-a/Starbucks/Chipotle as a 1031 asset.
I'm only entertaining Absolute Net leases as I'm not in the property management business.
Thanks for any input.

I specialize in office, but my two cents would be:
-Lower cap rates due to those tenants being good credit operators (which is a good & bad thing), you pay more for more stability
-They're very corporate and by the book, so everything from signage changes to simple paperwork changes has a process and can be slow
-Single tenant so the major risk is if they don't renew or go dark

You want Absolute Net leases not NNN.
What specific questions do you have?
No real horror stories on the Tenants you have listed. Their leases spell out everything, you know what you're getting.

Thanks for the clarification. Yeah Absolute Net is what I'd want.

No specific questions per se, I'm basically trying to make a list of the primary downsides, aside from real estate de-valuation.
I'm willing to accept the lower returns to go with a lower-risk tenant.
Aside from them going under, to me the main risk is that they walk at the end of the term.

htownag2007 said:

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Thanks for the clarification. Yeah Absolute Net is what I'd want.

No specific questions per se, I'm basically trying to make a list of the primary downsides, aside from real estate de-valuation.
I'm willing to accept the lower returns to go with a lower-risk tenant.
Aside from them going under, to me the main risk is that they walk at the end of the term.

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And you're stuck with a building that likely can't be easily repurposed into a 2nd-gen store without significant expense. So your options are to repurpose it or demolish it.

Rarely do those top tier Tenants close down a site. When is the last time you saw a closed McDonalds? Chick Fil A is relocating all their older prototypes for the newer and larger footprints but they won't just bail on a lease. Most of what you see will be brand new deals and will pay some of the lowest cap rates for those tenants but if you have 1031 money then all good. Look for 20 year leases; also look at bank ground leases too, not just food.

Thanks guys.

Find a specialist Broker if you want these type assets. Most of the quality sites are never brought to the open market. There are only a handful of guys that do all the buisness in this segment.

Most are build-to-suit and capture very high lease rates.

The downside is if the tenant leaves your building value is cut in half. Need to make sure the tenant has a very strong lease coverage ratio.

National Corporate credit QSR's are different than an overpriced C-Store/Pharmacy in 15k sf.

They sure traded like national credit

Not sure I would categorize Walgreens as a C-Store either.

Diggity said:

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They sure traded like national credit

Not sure I would categorize Walgreens as a C-Store either.

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Sort of. Walgreens/CVS leases are trading about 150-200 basis points above QSR at the moment.
Boulder Group 2025Q2 Net Lease Report
Personally, I would stay the hell away from banks at the moment.
For the OP, you can spend a lot of time going through Boulder Group data, and most of it is free.

That was my point really. A decade ago, those leases were bulletproof.

Be really careful with a ground lease like a number of national chains use. They get the building depreciation and at the end of the lease, make sure you will get title to the building and they can't tear it down.

You are paying the price of the building and land in these leases. As for those that say you never see a McDonald's or Burger King shutdown, guess again. Sometimes they just shut the store down due to low performance or they build a new one on a nearby site (after they tried to squeeze their landlord for a reduction in rent) and then shut down your store. We have 3 McDonald sites closed in my town.

These are almost always structured as ground leases. Just don't buy one that doesn't have significant term and/or options left on them. They will be priced accordingly due to risk. Getting a building back at the end of the term isn't always a bad deal if you paid the right price or have held it for an extended period of time.

I'm not sure you'd want an old McDonald's at the end of the lease. What are you going to do with it, turn it into a McDowell's?

Would you look at standalone Black Rock Coffee in Round Rock TX? Corporate deal.

Absolutely not

A couple of comments to some of the posts.

-CVS's did trade institutionally to a degree but the Buyers should know the risk of releasing a large box on 2.5 acres. It's a tall order at best and those Buyers didn't look 10-15 years out and say hey what do we do with this if it closes. This is why pads are generally the better option as you have multiple uses that can fit, no so on a CVS box.

-Regarding closed down McDonald's at such. Yes they close and relocate but nearly, if not, all of them on the market to buy are the newly relocated ones. Once again, do your research on location and growth/longevity of the sub market along with an analysis of where the next intersection that could cannibalize sales would be.

-There are specialized brokers that do these transactions everyday and understand the financial standings of the Tenant just as much as the submarket the site is located in. No deal is perfect and there are inherent risks in anything related to this type of transaction.

aggiejumper said:

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A couple of comments to some of the posts.

-CVS's did trade institutionally to a degree but the Buyers should know the risk of releasing a large box on 2.5 acres. It's a tall order at best and those Buyers didn't look 10-15 years out and say hey what do we do with this if it closes. This is why pads are generally the better option as you have multiple uses that can fit, no so on a CVS box.

-Regarding closed down McDonald's at such. Yes they close and relocate but nearly, if not, all of them on the market to buy are the newly relocated ones. Once again, do your research on location and growth/longevity of the sub market along with an analysis of where the next intersection that could cannibalize sales would be.

-There are specialized brokers that do these transactions everyday and understand the financial standings of the Tenant just as much as the submarket the site is located in. No deal is perfect and there are inherent risks in anything related to this type of transaction.

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There's a Mcdonalds near me that moved from a 90's timewise gas station to a brand new pad site 1 minute up the road. The old Mcdonalds location attached to the c-store has been vacant for 3 years now.

That's called a co-brand and those endcap are hard to re-lease.

The Mcd's will do a ton more sales off of a free standing unit up the road hence the move.

aggiejumper said:

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A couple of comments to some of the posts.

-CVS's did trade institutionally to a degree but the Buyers should know the risk of releasing a large box on 2.5 acres. It's a tall order at best and those Buyers didn't look 10-15 years out and say hey what do we do with this if it closes. This is why pads are generally the better option as you have multiple uses that can fit, no so on a CVS box.

-Regarding closed down McDonald's at such. Yes they close and relocate but nearly, if not, all of them on the market to buy are the newly relocated ones. Once again, do your research on location and growth/longevity of the sub market along with an analysis of where the next intersection that could cannibalize sales would be.

-There are specialized brokers that do these transactions everyday and understand the financial standings of the Tenant just as much as the submarket the site is located in. No deal is perfect and there are inherent risks in anything related to this type of transaction.

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When I've had to testify about absolute net leases property, I tell whoever is listening that an absolute net lease is more akin to a corporate bond with some dirt attached to it. The value of that lease can vary greatly depending on who is the tenant.