Seafood Chain's Move Proves That Landlords With Patience Can Land a Tenant Eventually
Fast-casual seafood chain Captain D’s latest store opening proves that even a long-empty building can eventually land a tenant.
The Nashville-based company this week opened a location in Carbondale, Illinois, on a property at 1040 E. Walnut St. that had sat vacant nearly six years. It is the third corporate-owned store opened this year. Phil Russo, vice president of real estate for Captain D’s, said two others are coming in Columbus, Ohio, and Union Park, Florida.
Captain D’s is in growth mode again after idling for a couple of years as the chain worked out a refreshed store design that has a smaller footprint. The chain has more than 540 locations across the country, 290 of which are corporate-owned stores and the rest owned by franchisees.
"The very mentality we utilize to expand our corporate presence instills confidence in franchisees to grow alongside us in markets holding immense potential, such as Illinois," Brad Reed, the company’s chief development officer, said in a statement.
Carbondale is the company’s sixth Captain D’s in Illinois. It chose a well-located property with an interesting history. Sitting near Southern Illinois University campus, the property had a 3,900-square-foot Italian restaurant building that never reopened after a car ran into it in late 2013. The restaurant owners sold the property to a real estate developer, according to Nick DiBrizzi, the listing broker with Coldwell Banker Commercial in Oak Park, Illinois.
DiBrizzi said the developer then sold the property to his client, Brooklyn, New York-based Lavelo Property Management, with a plan to build a Hardee's but that never happened. According to CoStar data, Lavelo Property paid $1.8 million in 2014 for the property, a price DiBrizzi said ultimately was too high for the building when the Hardee's didn’t happen.
But the location turned out to be perfect for Captain D’s. It sits on a peninsula of sorts with one-way streets on both sides and plenty of ingress and egress. Panda Express is on one side and an AutoZone Auto Parts store sits behind the building and a Panera Bread is across the street.
Captain D’s demolished the 1980 vintage restaurant building and built a 1,950-square-foot building, down almost 900 square feet from what it previously built. Russo said the existing building was not only too big but "it wasn’t positioned the right away" to maximize visibility.
Russo wasn’t sure of the total investment on the property but said the building and equipment alone probably cost $800,000.
DiBrizzi said the owner did a "beautiful deal with Captain D’s." The company signed a 10-year ground lease with multiple five-year options, he said.
The deal is a form of net lease in which the landlord has little to no responsibility for property maintenance or expenses. For the property owner, it means an annual yield, known as the cap rate, which wasn’t disclosed for this deal.
"We typically like to buy our properties," Russo said. After Captain D’s buys the property, it builds the store and then does a sale leaseback with a company that specializes in those deals.
"Sometimes it’s just not possible" to buy the properties for a location the company finds, Russo said.
For its part, Lavelo had the patience and staying power to wait on a tenant. According to CoStar data, Lavelo owns about two dozen properties around the country, many of which are occupied by Dollar General stores.
DiBrizzi described the Carbondale property as "peanuts" for Lavelo, but a deal still needed to be done at some point.
Marketing a property to land a tenant can take one day to three years and "some people don’t have the time so they get desperate," he said.
