McDonald’s Ground Lease in Azusa Sells at 3.25% Cap Rate

A brand new, single-tenant McDonald’s ground lease in the San Gabriel Valley city of Azusa sold for $3.54 mil, which represented a cap rate of 3.25%, the lowest recorded closing cap rate for a new construction McDonald’s in the U.S. on record, according to CoStar.

Built in 2017 on 0.60 acres, the 4.4k sf, double-drive-thru property is located at the signalized intersection of the I-210 freeway off-ramp and Azusa Ave and features a freeway-visible electronic pylon sign. McDonald’s is shadow-anchored by a newly-built Home2 Suites by Hilton.

The buyer, a private 1031 exchange buyer who lived near the property, was represented by Mark Repstad with Realty Advisory Group in Los Angeles. The seller, a private investor from Newport Beach, Calif., was represented by Eric Wohl of Hanley Investment Group Real Estate Advisors and Michael Walseth of SRS Real Estate Partners.

According to Wohl, the property benefits from synergy with the hotel as well as excellent exposure at the signalized hard corner intersection of I-210 on/off ramp with 256,000 cars per day and Azusa Avenue with 28,800 cars per day. There are more than 166,000 potential customers residing within three miles of the property with a household income of over $76,000.

The new 20-year ground lease is corporate guaranteed by McDonald’s USA LLC. The lease also includes rare 10% increases every five years. The new construction restaurant is the company’s latest prototype store with 64 seats. McDonald's is the world's leading global foodservice retailer with approximately 37,000 locations in over 100 countries.

“McDonald’s continues to be the most sought-after single-tenant retail investment in today’s market,” said Wohl. “We have seen continued cap rate compression for new single-tenant McDonald’s over the past year, especially in California.”

Walseth continues, “The McDonald’s brand reigns supreme among its competitors when ranked by investor desirability. Investors are drawn to McDonald’s because they can be assured they are buying the best location in town at a rent that is typically at or slightly below market. Rarely available, when a McDonald’s asset comes to market you can expect multiple offers and occasional bidding wars among investors especially in highly sought-after, infill markets.”