Case Study: $6.5M Life Company Financing for a 5-Unit QSR Portfolio Sale-Leaseback in Texas and Oklahoma

The Portfolio

The collateral consists of five freestanding quick-service restaurant properties located in Texas and Oklahoma. All five buildings are occupied by the same franchisee operator under separate absolute triple net leases. The weighted average remaining lease term across the portfolio is 12 years, with 10% rent escalations every five years on each lease. Total portfolio appraised value at the time of the sale-leaseback was $9.8 million, producing a weighted average going-in capitalization rate of 5.25% on aggregate net operating income of approximately $515,000.

The properties are freestanding pad sites in established commercial corridors, ranging from 2,400 to 3,200 square feet. Building conditions are excellent: the franchisee owns the operating brand and maintains a systematic capital maintenance program across all 22 locations. No deferred maintenance was identified in any of the five appraisals.

The Borrower

The borrower is a franchisee operator with 22 locations across two states. The sale-leaseback was structured to generate liquidity for a franchisor-mandated remodel program, which required capital across all 22 locations over a 36-month window. Selling and leasing back five locations simultaneously generated approximately $3.3 million in equity proceeds while preserving full operational control of each property under long-term NNN leases. No borrower name or identifying information is published per CLS CRE's privacy policy.

Why Life Company Beat Bank Financing at $6.5M

CLS CRE evaluated both bank and life company execution before placing this deal. At $6.5 million on a 5-property portfolio, a life company offered materially better terms than any bank alternative:

• Rate: The life company priced the loan at 5.95% fixed for 10 years: 65 to 80 basis points inside what bank CMT-based pricing would have delivered at this loan size at the time of closing.
• Non-recourse: The borrower's equity partners required non-recourse execution as a condition of the transaction. Bank programs in this size range are typically full recourse or partial recourse. Life companies routinely offer non-recourse at 65% LTV and below.
• Single loan on five assets: Financing five properties separately with five bank loans would have produced higher aggregate closing costs, five separate debt service coverage analyses, and five sets of prepayment provisions to manage. The life company accepted a single cross-collateralized, cross-defaulted loan on all five assets: simplifying structure and execution.
• 10-year fixed term: The franchisee operator needed certainty of financing for the full duration of the remodel program and intended hold period. A 10-year fixed term from a life company matched their business plan; a 5-year bank term would have required a refinance mid-plan.

The Underwriting

• Number of properties: 5 freestanding NNN buildings
• Total NOI: $515,000 (aggregate across 5 leases)
• Weighted average cap rate: 5.25%
• Loan to value: 66% (portfolio aggregate)
• DSCR: 1.48x on a 30-year amortization at 5.95%
• Tenant credit: Franchisee entity with 22-location system; life company accepted corporate franchisee guarantee
• Remaining lease term: 12-year weighted average; 10-year loan term well within lease duration

Loan Structure

• Loan amount: $6,500,000
• Interest rate: 5.95% fixed
• Term: 10-year fixed
• Amortization: 30-year schedule
• Prepayment: Yield maintenance through year 8, open for final 2 years
• Recourse: Non-recourse (with standard carve-outs)
• Collateral: Cross-collateralized and cross-defaulted across all 5 properties
• Origination fee: 1.0%
• Time to close: 45 days from signed application

What Made This Deal Work

1. Portfolio aggregation unlocked institutional pricing. A single $6.5M loan on five assets qualified for life company execution and pricing that no single $1.3M loan ever could. Portfolio aggregation is the most reliable way to access institutional capital on smaller NNN assets.
2. Strong operator with a 22-location system. The franchisee's scale demonstrated operating sophistication and creditworthiness beyond what a single-location operator would show. Life companies evaluate the full operating entity, not just the property.
3. Weighted average lease term cleared the loan term. All five leases had remaining terms exceeding the 10-year loan maturity. No lease expired before the loan did: a structural requirement for most life company NNN programs.
4. Capital use tied to value creation. The sale-leaseback proceeds funded a franchisor-mandated remodel program that directly increases AUVs (average unit volumes) across all 22 locations. The lender understood the equity recycling strategy and saw no credit concern.
5. Clean collateral with no environmental issues. Five pad sites in commercial corridors with no Phase II environmental findings. Clean Phase I reports on all five properties accelerated the underwriting and appraisal process.

Key Takeaway for QSR Portfolio Borrowers

For quick-service restaurant operators considering sale-leasebacks or refinances on multi-unit NNN portfolios, the inflection point from bank to life company execution typically occurs around $5 million to $6 million in total loan size. Below that threshold, bank programs offer speed and flexibility that life companies cannot match. Above it, life company pricing and non-recourse structures become difficult for bank programs to compete with.

If you operate five or more NNN locations and are considering a sale-leaseback or portfolio refinance, CLS CRE has active relationships with life insurance company lenders who specialize in franchise NNN portfolios. Contact us with your unit count, average lease terms, and target equity extraction: we can structure and price the deal before you commit to any lender.