Net lease folks - thoughts on Scooters and Dutch Bros??
They are both expanding rapidly. Curious what people think about these deals.
[{"id": "iz08wsn", "text": "Also curious on feedback.", "replies": [], "depth": 1}, {"id": "iz0c42w", "text": "Not a net lease guy but it seems interesting. \n\nThey require a lot of drive through space and not a lot of store footage. \n\nSeems like the coffee trend is picking up a lot. My only concern is because it\u2019s such a niche layout/footprint, not many other companies would want that kind of building if the tenant leaves.", "replies": [{"id": "iz5xpox", "text": "Exactly my thought, as well. I'm seeing several for sale &lt;1000 square feet. Seems very specific if you were to find another tenant in the future.", "replies": [], "depth": 2}], "depth": 1}, {"id": "iz0l783", "text": "May not be helpful- but I\u2019ve seen Scooters going in endcaps of multi-tenant strips in the Midwest lately too. I\u2019m sure single tenant is preference.", "replies": [], "depth": 1}, {"id": "iz0q5uu", "text": "I've financed both the development and acquisition of Dutch Bros sites/properties. The development is very easy and attractive to banks and debt funds. Developers can throw these up in 6 months and stores are profitable in 4 weeks from opening. Quick easy turnaround for whoever deployed the construction capital. Most are modular construction, meaning a dev only needs to scrape, pave, and get utilities online before dropping the box (made offsite) in the spot. \n\nI am curious how cap rate expansion could impact the development of these properties. If caps widen 100 bps, suddenly the developers are just breaking even and are less attractive to fund. On the permanent financing side, the main thing it boils down to is the bankroll of the franchisee/operator.", "replies": [{"id": "iz0qsv8", "text": "Really good info. Thanks for sharing.", "replies": [], "depth": 2}, {"id": "iz0xn5r", "text": "Im working on a deal with Starbucks, what kind of rates are you seeing? Would you mind if I send you a message?", "replies": [{"id": "iz0z15z", "text": "Sure thing, PM me", "replies": [], "depth": 3}], "depth": 2}, {"id": "izn9bn6", "text": "Sorry for the late response. Aren't the NNN rents set as a function of construction costs (for build-to-suit developments)? That is what is outlined in their 10-K/10-Q.\n\nIs there a cap on rents before construction takes place (i.e., cost overruns are the developer's risk)?\n\nThanks.", "replies": [{"id": "izxxsod", "text": "Generally, rents are set at a % of construction costs. The typical process is that the dev gets construction bids and assembles a final working budget. The tenant and dev have to agree upon this budget and rent is set. \n\nCost overruns are on the dev. If the overrun is large (i.e. 15% or more) then the dev would likely open a conversation with the tenant on either increasing their rent or kickbacks. Hope this helps", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iz26pnj", "text": "I'm in the middle of doing an analysis on property sales right now in the Phoenix MSA. Glancing at the spreadsheet, the Dutch Bros sales went through at low 4%'s while the Scooters went through at a low 5% - as an FYI.", "replies": [], "depth": 1}, {"id": "iz2cmyf", "text": "We have  Scooters ground lease in our portfolio, performed through C-19 pandemic just fine.", "replies": [], "depth": 1}, {"id": "iz3dt6j", "text": "For developers, they\u2019re great. As a net lease buyer I wouldn\u2019t touch them with a ten foot pole. In many cases they\u2019re asking 2 million or more for a 300-400 sf shed? Not only are the cap rates ridiculous but so is the rent per SF.. good luck replacing that rent if something happens.", "replies": [{"id": "iz4zyby", "text": "even the 5% plus cap rates you wouldnt touch?", "replies": [], "depth": 2}], "depth": 1}]