Owner-Occupied Acquisition · SBA 504

5624 Watauga Rd
Watauga, TX 76148

Acquire a newly built (2023) 8,030 SF freestanding retail building. Golden Glaze owner-occupies ~75%; the in-place Mr. Froze leaseback covers the remaining ~25% — financed with an SBA 504 loan at roughly 10% down.

8,030Building SF
2023Year Built
~75%GG Occupancy
10%Down (504)
0.91 ACLot · Corner

01The Opportunity

A corner-lot, modern metal-construction retail building with drive-through capability and ample parking. The seller offers an immediate-income leaseback on ~2,000 SF, leaving 6,030 SF for Golden Glaze to occupy — which is exactly what unlocks SBA owner-occupied financing.

Property facts

Address5624 Watauga Rd, 76148
Building size8,030 SF
Year built2023 (new)
Lot size0.91 AC · corner
ConstructionMetal · 1 story
Drive-throughYes
Property typeRetail (Class C)

Occupancy split

Mr. Froze (leaseback tenant)~2,000 SF · 25%
Golden Glaze (owner-user)~6,030 SF · 75%
SBA owner-occupancy required51% min
StatusClears easily

Because GG occupies well above 51%, the building qualifies for SBA 504 / 7(a). You keep Mr. Froze as a paying tenant in the other 25% (SBA allows leasing up to 49% of an existing building) and that rent helps your coverage.

The leaseback is the hook — read it right. This is marketed as an investment priced on a cap rate, but the leaseback is only ~25% of the building. The other 75% you occupy yourself, so for that portion you're an owner-user buying real estate, not an investor buying income. Don't let the broker price the whole building on the investment premium.

02Why SBA 504

For a real-estate-heavy, owner-occupied purchase, the SBA 504 is the cheapest capital available — lowest down payment and a long-term fixed rate you can't get on a conventional or 7(a) loan.

50% — Bank (1st lien)

Conventional first mortgage from your bank. ~25-yr amortization, market rate. Often the lead lender originates this piece.

40% — CDC / SBA

SBA-backed debenture through a Certified Development Company. 25-yr fixed rate — you lock today's rate for the life of the loan. This is the magic of 504.

10% — You (down)

Borrower injection. Lowest of any commercial structure (conventional wants 25–30%). Can sometimes be partly a seller note on standby.

504 vs 7(a)

  • Use 504 when the deal is mostly real estate (this one). Lower down, fixed rate, lower blended cost.
  • Use 7(a) only if you're also buying the Mr. Froze operating business or need working capital rolled in — variable rate, up to $5M, one loan.
  • This is a real-estate acquisition → 504 is the move.

The "new construction" nuance

Built 2023, but you're buying an already-built building, not constructing it with loan funds — so SBA treats it as existing and the 51% rule applies (which you clear). The stricter 60%-now / 80%-in-10-yr rule only hits ground-up construction. Expect the lender to confirm this classification; it's routine.

03Comps & Pricing

Asking price is $2,200,000 (Crexi) — about $274/SF on 8,030 SF. That's below the ~$300+/SF it costs to build new, so a 3-yr-old building is being offered under replacement cost. Strong starting point; the model below shows how the deal pencils at the ask and where to push.

Price-per-SF signals

Watauga retail avg (blended, older stock)~$242/SF
DFW retail avg (Q1 '26)~$276/SF
TX new-build cost to construct$305–445/SF
This deal — $2.2M ask$274/SF

At $274/SF the ask is already under replacement cost and under the DFW retail average — it's priced like older stock despite being a 2023 build. Room to negotiate toward ~$250/SF ($2.0M), but this is a buy even at ask.

Cap-rate signals (leaseback portion)

Suburban DFW retail6.6–7.4%
DFW retail average~6.7%
Multi-tenant retail (national)~7.0%
Franchisee QSR NNN~6.8%

Watauga is a softer submarket — anchor 7.0–7.5%, not the low-6s a broker will pitch. But remember the cap rate only governs ~25% of this building.

Sources: Crexi (Watauga retail), M&D CRE / Partners DFW Retail Q1 2026, Maxx Builders TX construction cost guide, Northmarq net-lease, ApartmentLoanStore cap-rate tracker (Jun 2026).

04Interactive Underwriting Model

Drag the inputs to pressure-test the deal. Two coverage lenses — the consuls forced this split (see §06): Store-profit DSCR leans on the new shop's cash flow, Rent-roll DSCR underwrites the building on market rent alone (GG pays itself + Mr. Froze), which is how a lender sizes the real estate. Lenders want ≥ 1.25×.

CDC/SBA tranche: 40%

~6,030 SF @ ~$20/SF NNN. What GG would pay a landlord — drives the rent-roll DSCR.
Store-profit DSCR
1.00×
Target ≥ 1.25×
Rent-roll DSCR
0.96×
How a lender sizes the RE
Cash to close
$290,000
down + ~1.5% CDC fee + ~$50k soft costs
Price / SF
$361
vs ~$325 target
Bank loan (1st lien)
CDC / SBA debenture
Borrower down payment
Bank payment / mo
CDC payment / mo
Total debt service / mo
Total debt service / yr
GG store revenue / yr
Store cash flow before occupancy
+ Mr. Froze rent / yr
Cash available for debt service
Annual debt service
Surplus / (shortfall) after debt
GG market rent / yr (paid to itself)
+ Mr. Froze rent / yr
Total rent roll
Annual debt service
Rent-roll DSCR

Sensitivity — DSCR by price & store margin

Green ≥ 1.25× · Amber 1.00–1.25× · Red < 1.00× (at current rate & sales inputs)

Margin ↓ / Price →$2.0M$2.2M$2.4M$2.6M
Read this before you obsess over the single-store DSCR. SBA underwrites your global cash flow — all 7 Golden Glaze shops + FlexStay — not just this one store, so approval likely isn't the question. But the consuls (§06) flagged that the store-profit number double-counts the rent GG stops paying. The honest test is the rent-roll DSCR: on market rent alone the building sits near 0.96× at ask — it does not self-fund as real estate. That's a price-and-rent discipline signal, not a dealbreaker if global coverage carries it. Every $100k off the ask ≈ $8.5k/yr less debt service.
Assumptions & disclaimer. Figures are estimates for internal planning only — not a loan commitment, appraisal, or offer. "Store margin before occupancy" = store-level cash flow after COGS, labor, and opex but before rent/mortgage and before debt service. Default base case: $2.2M price, 10% down, 50/40/10 split, 7.25% bank / 6.50% CDC, 25-yr amortization, $60k/mo sales, 25% margin, $40k/yr Mr. Froze rent, $120k/yr GG market rent. Cash-to-close approximates CDC processing (~1.5% of debenture) + ~$50k soft costs (appraisal, Phase I, title, legal, packaging); confirm exact figures with your lender. Note: a limited-/special-purpose property or a new business at the site can push the 504 down payment to 15–20% — model it with the down-payment slider. The bank first lien may reset/balloon at yr 5–10 rather than stay fixed 25 yrs. Verify the Mr. Froze lease terms and GG store projections before acting.

05Action Plan

From "I want this" to keys in hand. SBA 504 typically closes in 45–75 days when the package is clean and you use a Preferred Lender.

Lender package checklist

  • 3 yrs business tax returns (Golden Glaze entity)
  • 3 yrs personal tax returns + personal financial statement
  • YTD P&L + balance sheet, business debt schedule
  • Store-level pro forma for the Watauga location
  • Mr. Froze lease (rate, term, who pays taxes/insurance)
  • Purchase contract / LOI once price is agreed
  • Entity docs, ownership %, business plan summary

What lenders want to see

Owner-occupancy51%+ ✓ 75%
Global DSCR≥ 1.25× likely ✓
Credit (personal FICO)~680+
Down payment10% 15–20% if special-purpose
Property appraisalsupports price
  1. Get the Mr. Froze lease termsAsk is in at $2.2M / $274/SF. Last number you need is the leaseback rent + remaining term — it sets the income side of the DSCR.
  2. Submit LOI / negotiate priceAnchor with the owner-user argument: 75% isn't an income asset, it's just real estate.
  3. Engage an SBA Preferred Lender (PLP) + a strong CDCLive Oak, Newtek, Byline, Readycap, or a top regional bank. PLP status = delegated authority = weeks faster.
  4. Underwriting & appraisalLender pulls global cash flow, orders appraisal + environmental (Phase I likely).
  5. SBA authorization & closingCDC files the debenture, bank funds the first lien, you wire ~10% + fees.
  6. Build-out & open shop #8Take possession of the 6,030 SF, keep Mr. Froze paying rent in their 2,000 SF.

06Consul Review — Devil's Advocate

Three advisors were spun up to attack this model, not bless it. They converged on one thing: the original 1.32× standalone DSCR was optimistic. Corrected for the phantom-rent double-count, a Year-1 ramp, and real SBA costs, the building does not self-fund as real estate — it clears on Golden Glaze's global cash flow, not its own. The deal still has a strong floor (sub-replacement-cost price), but the cash-flow story needed rebuilding.

🛑 Red-team — attack the assumptions

  • Day-1 ≠ Year-3. New donut shops don't open at $60k/mo — they ramp (~$25–35k early). Month-1 standalone DSCR is closer to 0.78×, not 1.32×.
  • 25% margin borrows rent you now pay. A single shop nets 10–18% after real labor/COGS/waste; the 25% figure quietly excludes occupancy. Haircut to ~15% and store profit drops $180k → $108k.
  • Leaseback is binary. Mr. Froze is 18% of income with an unknown term. If he rolls off, coverage craters. Get the estoppel + lease before signing.
  • Bank lien likely isn't 25-yr fixed. The 50% first usually resets at yr 5–10. A reset to ~9.25% pushes a thin 1.32× toward ~1.15×.
  • Drive-through donut build = special-purpose. Likely 15% down, maybe 20% as a new business at the site.

Verdict: Qualified go on price, no-go on the model's cash-flow story. Honest Year-1 standalone DSCR is below 1.0×; it lives or dies on the other businesses carrying year one.

♟ Strategist — is this the right use of capital?

  • The $220k down is the kitchen raise's collateral. That cash + a personal guarantee on ~$2M of debt sits on the same balance sheet you're showing investors for the $1M commissary. You're pre-spending borrowing capacity.
  • Early rollups keep capital in the OpCo. Unit-level ROIC should beat the ~6–8% of owning the slab. Owning beats leasing only once the concept's proven and capital has nowhere better to go — not at 7→10 shops mid-raise.
  • The building is wagging the dog. Was Watauga on the shop-#8 list before this listing? A cheap building in the wrong trade area is still the wrong trade area.
  • Three new fronts at the worst time. Close a $2.2M deal + open a shop + become Mr. Froze's landlord, all while running two businesses and a live raise with no W2.

Verdict: Wait — unless Watauga was independently chosen as shop #8 before this building came up. That single fact flips it to proceed.

📒 Controller — the mechanics

  • Phantom-rent double-count (the big one). Counting the 25% store profit and treating the building as covered banks the rent GG stops paying twice. On a clean rent-roll basis — ~$120k GG (6,030 SF @ ~$20/SF NNN) + $40k Mr. Froze = ~$160k rent vs ~$167k debt = 0.96×, not 1.32×.
  • Down payment is probably 15%, not 10%. Special/limited-purpose + new business at the site → injection ~$330k, not $220k.
  • Cash-to-close omits the soft-cost stack. CDC processing (~1.5% of debenture), guaranty/funding fees, packaging, appraisal, Phase I, title, legal — another ~$40–60k+.
  • Bank first lien resets at yr 5–10 — modeling it fixed 25-yr understates refinance risk.
  • Use a separate RE LLC leasing to the GG OpCo — clean rent roll, liability isolation, depreciation, and it walls the SBA debt off from the $1M raise.

Bottom line: Corrected, this is ~0.95–1.0× rent-roll DSCR with ~$370–390k cash to close (15% down + soft costs), not 1.32× at $220k. It does not clear as drawn — it needs higher contracted GG rent, more equity, or documented store-profit support without the double-count.

Maple's synthesis — what actually changes. All three are right that the headline 1.32× was flattered. The model now shows two DSCRs: store-profit (optimistic) and rent-roll (~0.96×, how a lender sizes the RE). The price floor is still the best part of this deal — $274/SF under replacement cost limits the downside even if you re-tenant. Net: this is fundable on global cash flow, but it's not a self-funding real-estate play, and it shouldn't jump the queue ahead of the commissary unless Watauga was already your next shop. Three gating questions before an LOI: (1) was Watauga already shop #8? (2) what are Mr. Froze's actual rent + term? (3) does your SBA lender classify this special-purpose (15–20% down)?

Original base case (as first modeled)

Standalone DSCR1.32×
Down payment10% · $220k
Cash to close~$240k
Basisstore profit + rent

Consul-corrected base case

Rent-roll DSCR~0.96× thin
Down payment15% · ~$330k
Cash to close~$370–390k
Clears viaglobal cash flow ✓