Case Study: $5.8M Fitness Center NNN Financing in Charlotte, NC: Sale-Leaseback, 70% LTV, 35-Day Close

The Property

The subject property is a freestanding fitness center in Charlotte, North Carolina, encompassing approximately 22,000 square feet on a 1.4-acre site in a high-visibility suburban commercial corridor. The facility was custom-built for the operator in 2019 and features specialized mechanical infrastructure including reinforced flooring, commercial-grade HVAC with high air exchange rates, and extensive electrical capacity for equipment loads that would be impractical or prohibitively expensive for any other tenant to replicate.

The property was sold at a 5.50% capitalization rate on annual net operating income of $456,500. Under the absolute NNN sale-leaseback lease, the operator continues paying all taxes, insurance, maintenance, and capital expenses related to the property. The lease includes 2.0% annual rent escalations throughout the 15-year primary term, four five-year renewal options, and a right of first refusal on any future sale of the property.

The Borrower (Buyer)

The buyer is a private real estate investor specializing in single-tenant net lease acquisitions in the Southeast. The investor has a track record of eight prior NNN acquisitions across QSR, auto service, and medical uses, and was expanding into fitness NNN after conducting independent research on the sector's post-pandemic recovery. The buyer sourced the deal through a net lease broker relationship and was not part of the original sale-leaseback negotiation between the operator and the seller of record.

The buyer's prior NNN experience and existing relationship with the bank STNL program gave the financing a smooth path to approval. Lenders in the STNL program are familiar with repeat NNN investors who are evaluating new tenant categories, and the buyer's track record in adjacent uses helped offset any residual lender skepticism around fitness credit. No borrower names are published per CLS CRE's privacy policy.

The Operator (Tenant)

The fitness tenant is a PE-backed regional operator with 14 locations across the Carolinas and Virginia, offering a premium fitness and group wellness concept that competes in the $45 to $75 per month membership tier. The operator generated approximately $2.1 million in gross revenue at the Charlotte location in the trailing 12 months, producing a rent-to-revenue ratio of approximately 21.7%: within the acceptable range for fitness NNN underwriting.

The sale-leaseback generated approximately $2.5 million in net equity proceeds for the operator after paying off an existing mortgage. The operator used this capital to fund buildout costs at two new locations opening in Raleigh and Richmond in the second half of 2026. This is a textbook sale-leaseback use case: converting an illiquid real estate asset into working capital without disrupting operations or giving up any location.

Why Fitness NNN Is Gaining Lender Acceptance in 2026

Fitness center NNN assets spent several years in lender purgatory following the pandemic closures of 2020 and 2021. Banks that had been lending on fitness NNN prior to 2020 pulled back sharply, and the category was effectively off the table for most bank STNL programs from 2020 through 2023. The recovery in fitness membership and the financial stabilization of multi-location operators have changed the calculus.

Several structural factors are driving improved lender acceptance in 2026:

• Multi-location operator track record. The pandemic separated viable operators from marginal ones. A 14-location operator that survived 2020 through 2022 without permanent closures demonstrated operational resilience that a single-location studio cannot claim. Banks giving credit to operators with 10 or more locations and a 2020 through 2022 track record is a meaningful shift from 2021 through 2023 underwriting.
• High tenant improvement barrier. The cost to replicate a custom-built fitness facility, including specialized MEP infrastructure, equipment pads, ventilation, and finishes, exceeds $100 per square foot in most markets. On a 22,000 SF facility, the tenant improvement cost for a replacement fitness tenant would exceed $2 million. This effectively makes the location sticky: the tenant is far more likely to renew than to abandon a purpose-built facility and build from scratch elsewhere.
• Rent coverage at stabilization. A rent-to-revenue ratio of 21.7% for a premium fitness concept is conservative relative to the 30 to 35% ratios that distressed operators were running pre-pandemic. Lenders now require operators to provide trailing 12-month revenue data, and deals where rent-to-revenue exceeds 25% face more scrutiny.
• Long absolute NNN leases. The 15-year lease term with 2.0% annual bumps is the structure that makes fitness NNN fundable. Lenders will not accept leases shorter than 10 years on fitness, and most bank programs require 12 to 15 years minimum for fitness to qualify at 70% LTV.
• Charlotte market dynamics. Charlotte's population growth (ranked among the top 10 US metros by net migration since 2020) supports premium fitness demand. Operators in high-growth Sun Belt markets command lower lender skepticism than operators in flat or declining population markets.

The Underwriting

• Loan to value: 70% (at the program maximum for fitness NNN at this bank)
• DSCR: 1.32x on a 25-year amortization schedule (minimum required for fitness: 1.30x)
• Debt yield: 7.9% on the loan amount
• Remaining lease term: 15 years absolute NNN with four renewal options
• Rent coverage: Trailing 12-month revenue supports rent-to-revenue of 21.7% (acceptable range: under 25%)
• Tenant: 14-location PE-backed regional operator; entity guarantee; personal guarantee from managing partner
• Facility: Custom-built 2019 construction; no deferred maintenance; active membership base
• Environmental: Phase I completed; no recognized environmental conditions

Loan Structure

• Loan amount: $5,800,000
• Interest rate: 6.90% fixed (CMT plus 215 basis points)
• Term: 5-year fixed
• Amortization: 25-year schedule
• Prepayment: Step-down (4-3-2-1-0)
• Recourse: Full recourse at 70% LTV
• Origination fee: 1.0%
• Rate lock: 30-day lock from commitment
• Time to close: 35 days from signed application

What Made This Deal Work

1. Multi-location operator with Carolinas market density. Fourteen locations across three states, with 6 concentrated in the Charlotte metro, gives the lender a picture of regional enterprise strength. A buyer acquiring a single-location fitness tenant with no other Carolinas presence would face a substantially harder lender conversation.
2. Revenue data confirmed rent coverage. Providing trailing 12-month revenue data before being asked converted a potential friction point into a positive underwriting element. The bank reviewed the membership count, average revenue per member, and churn rate in addition to the GAAP revenue figure.
3. Purpose-built facility creates high replacement cost barrier. The custom MEP infrastructure, reinforced flooring, and equipment pads meant that the cost of converting the space to any other use would be substantial. Lenders weigh this when modeling their exit if they ever had to foreclose: a fully equipped fitness facility has a far more functional secondary market than a stripped vanilla shell.
4. Long absolute NNN lease negotiated correctly. The 15-year term with 2.0% annual escalations was structured specifically to make the property financeable. Some operators resist absolute NNN leases, preferring to retain landlord protection rights. The PE sponsor in this deal accepted the full absolute NNN structure because they understand the financing implications and wanted maximum proceeds from the sale-leaseback.
5. Charlotte's population growth supports exit underwriting. At a 5.50% cap rate, a lender exits comfortably if market cap rates move 50 to 75 basis points in either direction. In a growing market like Charlotte, the probability of a forced sale at a materially higher cap rate is lower than in a stable or declining population market.

Key Takeaway for Fitness NNN Buyers and Operators

Fitness center NNN is fundable in 2026 for deals that meet four criteria: multi-location operator with a pre-and-post-pandemic track record, rent-to-revenue under 25%, long absolute NNN lease of 12 years or more, and custom-built purpose-specific facility with meaningful tenant improvement replacement cost. Deals that check all four boxes can access the bank STNL program at 65 to 70% LTV and compete with other NNN categories on pricing.

Fitness operators considering sale-leasebacks should structure leases carefully before going to market. The lease structure determines the pool of available capital and the cost of that capital. An operator that signs a modified gross lease or a short-term NNN with break options will find financing options limited to bridge or specialty lenders at materially higher rates. Absolute NNN with long initial terms opens the bank STNL program and, for loans above $5 million, potentially life company execution as well.