Wednesday, February 17, 2010

Net Leases Grow on Chains

It’s no secret that most net lease properties belong to nationally established retail chains. Among the more popular are McDonalds, Walgreens and 7-Eleven. Recently two more restaurant chains, Chipotle and Chick-fil-A, have shown they are poised for expansion. This should signify possible buying opportunities for net lease investors.

In the year ending on December 31, 2009, Chipotle experienced very positive results:

  • Its revenue increased 14.0% to $1.518 billion

  • Comparable restaurant sales rose 2.2%

  • Net income increased 62% to $126.8 million

  • Diluted earnings per share rose 67% to $3.95

For 2010, Chipotle expects its sales to remain steady and plans on opening 120-130 new stores. This expansion creates new investing opportunities with a highly successful tenant.

Chick-fil-A also had a successful year in 2009:

  • Overall sales increased 8.6% to $3.217 billion.

  • Same-store sales increase of 2.52%.

  • Opened 83 new restaurants.

In 2010, Chick-fil-A plans on opening 78 new locations, also creating more investment opportunities.

Though many lament the current market, the steady expansion of many successful quick service restaurants has provided fuel for the net lease market. Chains like McDonalds, whose global same store sales rose 2.6% for January and Buffalo Wild Wings, who has experienced rapid growth, represent enticing opportunities for investment. Tenant growth and that of their applicable brands ensures products are widely dispersed and potentially adds the to staying power of those tenants. Those who have demonstrated steady, durable demand and will only attract more attention as they expand.

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