SRS Real Estate Partners closed the $6.84-million ground lease sale of a Raising Cane’s property located at 4100 Central Ave. in Riverside. Situated on 1.29 acres, the 3,267-square-foot restaurant property was built in 2024 and has a corporate-guaranteed, absolute triple net 15-year ground lease in place.

SRS Capital Markets senior managing principals Patrick Luther and Matthew Mousavi represented the seller, a Southern California-based developer. The 1031 exchange buyer, a private investor from Washington, was represented by Brian Quinn and Bryan Cunningham of JLL. The closing cap rate was 4.75%.

“Acquiring this Inland Empire Raising Cane’s property provided the passive buyer with a strategic investment opportunity due to its prime location, strong brand presence, and consistent consumer demand,” said Mousavi. “Situated in a high-traffic area with excellent visibility and accessibility, the property benefits from the fast-casual dining sector’s resilience and growth.”

Beta Agency SVP Adam Friedlander represented the seller of a Raising Cane’s Restaurant located in Carson. The sale price was $7,525,000. The undisclosed buyer was a private California investor in a 1031 exchange.

Friedlander said, “The sale of the Raising Cane’s in Carson represents the highest-priced sale of a fast-food restaurant in California to trade this year. In addition, this is only one of three Raising Cane’s leased investments to trade in California in 2024. Selling a high-rent NNN investment at a low cap rate is a difficult task given existing market conditions. We are very pleased with the results.”

Built in 2022, the 2,950-square-foot restaurant is occupied in a 12-year, triple-net lease. Located directly across from the 1.1-million-square-foot South Bay Pavilion Mall, the property benefits from a dense surrounding demographic and significant vehicular traffic, according to Beta Agency.

Hanley Investment Group Real Estate Advisors arranged the sale of a new-construction, single-tenant property occupied by a Raising Cane’s Chicken Fingers Drive-Thru restaurant in Imperial Beach, . The sale price in this off-market transaction was $5.7 million. 

EVPs Bill Asher and Jeff Lefko represented the developer and seller, Palm Avenue 111 Partners, LLC of Encinitas. The buyer, a family trust based in Northern California, was represented by Scott Ketchum in Newport Beach.

“We procured an all-cash California-based 1031 exchange buyer specifically seeking an absolute triple-net quick serve drive-thru investment in California,” said Asher. “We secured the buyer within their 1031 exchange identification period, opened escrow shortly after Raising Cane’s opened for business and closed the transaction in 40 days.”  

Hanley Investment Group Real Estate Advisors arranged the sale of a new-construction, single-tenant Raising Cane’s Chicken Fingers Double Drive-Thru restaurant within Santa Maria’s Enos Ranch mixed-use development for $5.1 million.  

VPs Alexander Moore and Sean Cox, along with EVP Kevin Fryman, represented the seller, College West Partners, L.P. of Tustin, and the buyer, a private investor based in Los Angeles.   

“We closed escrow within 62 days from our listing date while eight other single-tenant Raising Cane’s were on the market in California,” said Moore. “We procured a direct all-cash investor with short due diligence and closing time frames who owned multiple Rasing Cane’s restaurants in California and was not in a 1031 exchange.” 

Cox added, “Single-tenant QSR drive-thrus leased to national corporate tenants continue to experience the highest demand from net lease investors in today’s market.”

How does a fund seeking to buy $200M worth of single-family houses in the Southeast and turn them into rentals deploy that much capital? One unsolicited text at a time.

Investors are flooding the for-sale homebuyers market in Atlanta and the Southeast to turn them into rentals.

C-Star, a New York-based investment firm, is raising $50M in equity for a fund to buy single-family houses and convert them to rentals in Georgia, Florida and the Carolinas over this coming year, Michael Nemirovsky, the vice president of the investment fund, told Bisnow. With debt, the fund will look to spend $200M buying houses.

The single-family rental fund is C-Star’s third; its first launched in 2018 and spent $5.6M on 36 single-family homes in Metro Atlanta at a total cap rate of 7.5%, Nemirovsky said, and earlier this year, C-Star sold it to an SFR operator for $10.5M and an in-place 4.5% cap rate. Nemirovsky didn’t identify the buyer.

“We have seen multiple offers, five cash offers, for Fund I,” CEO Sherry Li said.

C-Star’s second fund expanded its geographic reach to include the Research Triangle and Charlotte areas of North Carolina and amassed $24M in investor funding. Li said the firm will hold this fund for two more years before marketing it for sale.

The third fund has already raised $10M, C-Star officials said, largely from high net worth investors and family offices. Spending it is another matter.

“It’s hard to deploy the capital,” Li said.

U.S. home prices are at all-time highs and mortgage rates are rising fast. To compete for deals, C-Star has an in-house team of 11 people who canvass the National Association of Realtors’ Multiple Listing Service, leverage relationships with management companies and, yes, send out text messages to homeowners, hoping to entice them to sell, Li said.

Li said the typical home purchase in the two earlier funds was between $150K and $250K. C-Star then did light renovation work, roughly $10K per house, before putting them on the rental market. But today’s marketplace necessitates C-Star getting a little more aggressive for the third fund.

Not only did it expand its geographic reach in the Southeast, the hub for SFR activity in the U.S., to include South Carolina and Florida, but it is now raising the amount of money it is willing to spend on houses: between $200K and $300K per house and spending up to $30K in renovations each, Li said.

C-Star is just one player in a crowded field of investors chasing SFR properties. A handful of neighborhoods originally planned for sale are now turning into rental campuses after being acquired by institutional investors. Other builders are constructing entire single-family neighborhoods with the intent of renting the units.

Brock Thomas, the founder and CEO of Swift Street Investments in Kansas City, Missouri, said he scours records for homeowners who are behind on mortgage payments to make purchase offers and then converts those homes into rentals.

“There’s just so much demand. And that’s not just from buyers, but from renters as well,” Thomas said. “Believe me, I look for reasons not to buy. Right now, I think there’s just this small window of opportunity in the market.”

C-Star is part of a universe of aggregators who buy single-family houses and turn them into rentals for a housing-hungry population, then amass a portfolio and ultimately sell it to larger institutional investors, who committed $45B to buy into the sector last year, PERE reported, citing data from John Burns Real Estate Consulting.

While the activity only accounts for a sliver of overall housing transactions, it is a fast-growing segment, with critics who say the investor rush been partially to blame for fast-rising housing prices that are elbowing many first-time or lower-income homebuyers out of the market.

According to Green Street Advisors, there are 16 million single-family rental homes in the U.S., which encompass 35% of all rental units, an amount that has increased 25% over the past decade. In the next five years, 810,000 households are expected to sign leases for single-family houses, according to Green Street, 1.5 times higher than the rate of those renting apartments.

“There’s a lot of pressure. There’s a lot of pent-up demand,” said Tom Johnston, the director of brokerage services for SVN SFRhub Advisors, which brokers portfolio sales in the SFR market. “There’s so much money in the space.”

C-Star will be facing enormous competition. The median home value in Georgia was just over $300K in March, according to Zillow, a more than 20% increase from 2020. The average sales price in the state jumped 17% to nearly $370K, according to the Georgia Association of Realtors. Georgia is the most popular state for SFR companies, which own 5.1% of all single-family rental properties, according to Green Street. Florida ranked second at 4.2%, followed by Arizona at 3.7%.

While scattered throughout Metro Atlanta in counties like Gwinnett, Fulton, Newton and Clayton, a number of C-Star’s homes are south of the city, where housing prices tend to be more moderate.

“We tend to be choosing [more] the entry homes than the medium or luxury homes,” Li said. “That’s what most renters are interested in.”

For groups like C-Star, increased competition from larger investors and institutions will become harder to overcome as interest rates continue to rise in the coming months, Johnston said.

“I think the smaller operators who have to use leverage to buy portfolios are at a disadvantage to the big funds. As we see interest rates creep, we’re going to see the smaller operators are going to have to look harder for the good deal,” he said. “It’s certainly going to favor the larger institutional operators who have cash and more funds. I think it gives them more leverage.”

Regardless, the demand for SFR is increasing, Johnston said. Last year, his firm sold 1,500 homes across the U.S. for just under $300M.

“We will probably hit that number or near that number by June,” he said, projecting that SFRhub could sell $500M in houses this year to SFR investors.

Thomas said the current housing environment is prompting many investors to be more aggressive in their buying strategies, especially with funds that have penalties if they don’t deploy capital within certain time frames.

Thomas said Swift Street only uses in-house capital from previous investments to buy new homes. His firm is now looking to buy traditional multifamily properties as well, in an effort to diversify its holdings.

“Most people used to find the deal before they raised the capital. Now the capital is getting raised before they find the deal,” Thomas said. “How does a homeowner compete? These houses aren’t coming back to the market. These houses are going to be traded like mortgages.”

Despite the competition, Li said C-Star is not experiencing any pressure to hurry up and buy assets from its investors. Instead, Li said she expects rising rates to chase more buyers away from the market, giving investors a larger pool of homes to choose from.

“I think over time, especially with the Federal Reserve rising interest rates, you will see fewer homebuyers on the market and they will become renters,” she said.