Turning a tenant’s Right of First Refusal into a win–win (and a strong tax play).

Deal Overview: Creative Structuring in a Car Wash Investment Sale

I recently worked on the sale of a fee simple express car wash that highlights how creative deal structuring in commercial real estate can align the interests of the buyer, tenant, and broker while preserving long-term value. The buyer, a private investor focused on tax-advantaged real estate, was primarily driven by strong cash flow and the ability to pursue 100% bonus depreciation in year one, subject to CPA guidance. To meet a strict year-end deadline, he submitted a strong all-cash offer with a short contingency period, ensuring the ability to close before December 31 and maximize tax benefits.

The Challenge: Right of First Refusal (ROFR) Complication

The asset itself was a stabilized express car wash with an experienced operator and strong real estate fundamentals, but the deal became more complex due to the tenant’s Right of First Refusal (ROFR). After the offer was accepted, the tenant exercised their ROFR and began pursuing a hard money loan to acquire the property on the same terms. The issue quickly became apparent—the projected interest rate was higher than the tenant’s current rent, and the added debt burden risked putting unnecessary strain on the business, while the buyer still needed to close quickly to execute his tax strategy.

The Solution: Structuring for Alignment

Instead of letting the deal fall apart, we reframed the situation with a structure that separated ownership from timing. The investor would move forward with the all-cash purchase and close before year-end, while the tenant would receive a defined 2–4 year window to repurchase the property at a price growing at 3.5% annually, compounded. If the tenant chose not to exercise that option, they would still retain the right to match any future third-party offer. This approach allowed the tenant to avoid high-cost financing, maintain operational stability, and work toward ownership in a more strategic way, while the investor secured immediate closing, strong in-place cash flow, and a built-in return through the structured repurchase price, along with future flexibility for a potential 1031 exchange, subject to tax advice and current law.

Broker Insight: Protecting Value in ROFR Transactions

From a brokerage perspective, this transaction reinforced an important lesson around commission protection when dealing with ROFR clauses. The original buyer’s offer established pricing, triggered the ROFR, and ultimately created the transaction, and significant value had already been delivered through sourcing the opportunity, underwriting the deal, aligning it with the client’s tax strategy, negotiating the LOI, and coordinating timing around year-end deadlines. In these situations, it is critical to proactively address compensation through clear language—reviewed by counsel and compliant with brokerage policy—ensuring that if a tenant exercises a ROFR based on terms procured by the broker, the broker is entitled to a negotiated portion of the commission.

Key Takeaways for Investors and Brokers

This deal reinforces two key insights for commercial real estate professionals: creative structuring can turn a potential deal obstacle like a Right of First Refusal into a win-win outcome for both investors and tenants, and brokers must be proactive in protecting their value and compensation in complex transactions. If you are navigating ROFR clauses, bonus depreciation strategies, or creative structuring in commercial real estate investments, opportunities like this often come down to how the deal is structured, not just whether it pencils.