The Situation

More than two decades ago, I represented the owner of a triple-net Dunkin’ Donuts on Long Island. The property had been held in the family for a generation and was a clean, well-located NNN asset with a national credit tenant – exactly the kind of deal a buyer chases.
We had that buyer. He wanted the property badly and was ready to close. But there was a complication that everyone in the room believed would kill his shot at it: the tenant held a right of first refusal.

The Obstacle

Under the lease, Dunkin’ Donuts held a “right of first refusal to purchase the premises.” In plain terms, before the owner could sell to any third party, the tenant had the right to match the buyer’s offer and take the property themselves.

The consensus was that Dunkin’ would exercise. The pricing was attractive, the location was strong, and controlling the real estate under your own store is textbook tenant strategy. Everyone – buyer, seller, and the professionals around the deal – assumed the tenant would step in and the outside buyer would be left with nothing.

The Insight

I went back to the actual language of the lease rather than the assumption everyone was operating under. The clause was specific: it granted a right of first refusal to purchase the premises – the real property itself.

It said nothing about a sale of the membership interests in the LLC that owned the premises. The trigger was a sale of real estate. A sale of the ownership entity was a different transaction that the clause simply did not reach.

Why This Property Was Uniquely Suited to the Structure

An entity sale is only clean if the entity itself is clean – and this one was. Although the property had been in the family for a generation, the owners had recently placed it into a newly formed LLC. That entity was only about a year old, which meant:

No accumulated liabilities. A one-year-old, single-asset LLC carried no litigation history, no legacy debt, and no hidden exposure for a buyer to inherit.

Minimal depreciation recapture. With almost no depreciation taken, the tax drag that normally makes buyers wary of acquiring an entity rather than the asset simply wasn’t there.

In other words, the buyer could purchase the LLC and get essentially the same clean position he’d have gotten buying the real estate outright – without triggering the tenant’s right.

The Execution

Rather than selling the premises and inviting the tenant to match, we structured the transaction as a sale of the membership interests in the LLC. Title to the real estate never changed hands; the owner of the entity did. The right of first refusal, drafted narrowly around a sale of the premises, was never triggered.

The Outcome

The buyer got the property he wanted. The seller sold to the buyer of their choosing, at their price, on their timeline – not to their tenant by default. Dunkin’ remained in place as a paying tenant under the same lease. Everyone walked away satisfied.

The Takeaway

Deals that look impossible on their face are often just poorly read. A right of first refusal is only as broad as its exact words – and here, the words covered the real estate but not the entity. Combined with a clean, newly formed holding LLC that made an entity sale genuinely attractive rather than a liability trap, that distinction turned a deal everyone had written off into a closing that satisfied every party at the table.

Handled by Anthony Ciafardoni, Silber Investment Properties