Investment groups buy 18 Wendy’s restaurants in $23.7 million deal

Two real estate investment groups have purchased 18 Wendy's restaurants in Las Vegas for $23.7 million, continuing a trend of investments in single-tenant retail property with safe long-term returns.

Cole Real Estate Investments purchased 10 of the restaurants, closing on the transaction in late December, said John Bacon, vice president of marketing for the Phoenix-based firm. National Retail Properties of Orlando, Fla., bought eight restaurants.

Due to a confidentiality agreement, Bacon said he could not provide financial details of the acquisition. Cole completed $3.2 billion in real estate acquisitions in 2012 and holds 2,000 assets in 47 states, he said.

"Our primary business model is acquiring single-tenant assets, so they fit with our normal acquisition criteria," the marketing executive said Tuesday. "That's generally hold for the long term."

Cole invested $1.1 billion in single-tenant retail properties in 2012, including a $192.1 million sale-leaseback of 140 Family Dollar stores and a Dollar General portfolio with 32 locations for $45.7 million.

Columbus, Ohio-based Cedar Enterprises, which began operation in 1975 as Wendy's of Las Vegas, still owns the franchise operations, selling only the restaurant buildings. After securing the franchise rights, Wendy's of Las Vegas opened its first store near University of Nevada, Las Vegas, adding more than 30 locations around the valley.

J. Dapper, a Las Vegas developer who built and sold several Carl's Jr. restaurants, said single-tenant retail properties are the hottest investment in commercial real estate right now.

"It's like gold," Dapper said. "It's perceived to be extremely safe. The perception is you build a multi-tenant shopping center and you have the potential of a mom-and-pop going out of business. They may not pay you. You build Carl's Jr., McDonald's, Jack-in-the-Box, O'Reilly Auto Parts, you're going to get paid."

Dapper built a Carl's Jr. on a half-acre retail pad in The Village at Centennial Hills and sold it for $2.3 million in 2011.

People like investing in fast-food restaurants because those businesses thrived during the economic downturn, said Mark Taylor, principal of Taylor Capital Group in Las Vegas. It's a solid asset to add to a commercial real estate portfolio, he said.

"If you get a vacant building, it's not like a big space to fill. You have a tenant you know and trust. Your risk is a lot less than a big commercial or office building with a fair amount of uncertainty, especially for the average investor," Taylor said.

Steve Larson, owner of 37 Carl's Jr. restaurants in Las Vegas, said it's obvious that real estate investors are taking advantage of good capitalization rates - a function of purchase price and annual revenue - probably in the 6 percent range.

Single-tenant, triple-net properties have performed well, but they're not guaranteed to make money, Larson said. He added 12 Carl's Jr. locations over the last five years.

"Every business is challenging, no question," he said. "We all have our ups and downs. It's been challenging for all of us."

While a lot of investments may look like a "shoo-in" with strong past performance, they need to be evaluated for risk and return, advised Christopher Sparrow, president of Sparrow Wealth Management in Las Vegas.

"Those are the ones I'm most skeptical of," he said. "In general, when you look at investments that outperform in the near future, they have a sense of excitement, but they carry risks that are overshadowed by their strong performance. If Wendy's itself doesn't do so well, you're exposed to a single store in the fast-food industry."

Investment in single-tenant properties took off in Las Vegas last year with the $27.8 million acquisition of a Walgreens drugstore on the Strip. At $1,736 a square foot, it was the highest price for a leased drugstore in America, a broker for Marcus & Millichap said.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.