Denny’s is a great restaurant concept that we have gone over many times in the past and like the opportunity to review them when they come up for sale. We prefer corporate deals, but strong franchisee deals are worth taking a close look at depending on the location. This location is one of them. Tacoma Washington is a strong market for Denny’s and there are many motels around this unit to give it a constant flow of customers for many years to come. https://www.tacoma.gov
The future value of the land is obviously for development of more motel units but for now that Denny’s will work fine and provide steady cashflow. The land itself is not a great development site, and ingress is more like an easement between two motels, thus the land value is tricky but the FAR (floor area ratio) will not be affected. This particular unit seems to be doing about 8% rent versus sales, which is the maximum you would want to see on any of these deals. You really want to see that ratio below 7% but this number is workable.https://www.dennnys.com
I would grade this deal at a B- to C+ and offer a 7.5% cap rate and see if you can get better increases or even a percentage rent clause.
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