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1H:19 Valuations & Finance Update

Report Highlights
(1) EBITDA multiple estimates (post G&A) for 44 chains based on survey data from 8 leading appraisal firms; (2) a comparison of public restaurant company and private franchisee valuation multiples; (3) a summary of real estate cap rate trends based on data provided by Marcus & Millichap; and (4) an update on borrower financial condition, changes to underwriting standards, restaurant loan origination volume, and interest rate outlook derived from a survey of leading lenders.
(1)1H:19 franchisee EBITDA valuation multiples declined slightly from 2H:18 and were at the lowest level since 2H:14, but are expected to stabilize in 2H:19; (2) the public $1B+ chain restaurant company valuation multiple and premium reached their highest levels in at least 9 years reflecting strong interest in QSR which continues to significantly outperform FSR; (3) aggregate cap rates for single-tenant net-leased restaurant properties decreased slightly during 1H:19 as interest rates declined and the private 1031 buyer pool continued to grow; (4) although lenders are more optimistic about their borrowers’ financial condition, underwriting standards tightened; (5) 1H:19 aggregate loan origination volumes were mixed and the outlook for 2020 loan originations is slightly less bullish; and (6) the average LIBOR spread was basically unchanged from January, but lower interest rates have translated into lower borrowing rates resulting in a mostly favorable lending environment for large operators.

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