September 19, 2025
For financial advisers and professional investors only – not for distribution to retail investors.
If you only have a minute…
- If McDonald’s were to spin out its real estate, it would be the largest REIT globally.1
- With over 43,000 locations worldwide, 80% of which are owned by McDonald’s, the company generates significant recurring rental income.2
- Its triple net lease structure allows McDonald’s to pass operating costs such as maintenance, insurance and taxes onto the franchisees – a model that supports durable free cashflow growth.
The strategic role of real estate in McDonald’s business model
McDonald’s is known globally for its brand, consistency and ability to adapt to consumer tastes. Yet, behind the operational scale, the real foundation of the business is real estate.
Restaurant businesses are notoriously complex: thin margins, sensitivity to food costs, and shifting consumer preferences. Franchising mitigates some of these challenges by transferring operational risk to franchisees. McDonald’s has taken this a step further – embedding real estate ownership at the core of its model.
Since 1956, McDonald’s has pursued a strategy of acquiring land, constructing properties, and leasing them to franchisees. This approach provides the company with a stable, inflation-linked revenue stream independent of food sales – a differentiator from peers who rely more heavily on operating margins.
Real estate scale few can match
Fast forward to today: McDonald’s owns approximately 80% of its global restaurant locations. This extensive real estate portfolio contributes significantly to the company’s financial performance:
- Real estate earnings now account for roughly 60% of McDonald’s operating income, up from approximately 40% a decade ago.3
- In recent years, McDonald’s has reported around $US 10 billion in real estate net operating income, compared to $US 1.5 billion from company-operated restaurant net income.4
This scale positions McDonald’s as a potential real estate powerhouse. If spun out, its real estate arm would immediately become the largest REIT globally, eclipsing industry leaders such as Prologis, American Tower, and Equinix. Based on current rental income levels and assuming a conservative capitalisation rate of 6%, the estimated asset value of a McDonald’s REIT would be approximately $US 120 billion.5
McDonald's Operating Income Breakdown
Source: Company Filings, McDonald's 2025
The triple net lease advantage
McDonald’s benefits from the strength of its lease structures. The majority of its locations operate under triple net leases, whereby tenants are responsible for property maintenance, insurance, taxes, and refurbishments. This arrangement minimises McDonald’s exposure to capital expenditures and ensures that the majority of rental income flows directly to the bottom line. The triple net lease is widely regarded as a gold standard in real estate, offering a high-quality covenant and stable, predictable cash flows.
Market transactions involving McDonald’s-leased properties typically command some of the lowest yields in the sector, reflecting both the strength of the tenant and the prime locations of the assets.
Could McDonald’s be a REIT?
On paper, the business resembles one. The scale, structure and quality of McDonald’s real estate portfolio share many characteristics with leading global REITs. Yet McDonald’s has opted to retain its integrated model.
Activist investors have long argued for separations – Bill Ackman in 2005 and Larry Robbins in 2015 both encouraged McDonald’s to spin out its real estate, estimating billions of dollars in potential shareholder value. But management has consistently highlighted the benefits of integration, particularly as the operating environment evolves.
Consumer trends are shifting – the rise of weight-loss drugs and growing demand for healthier food options adds uncertainty to traditional fast-food models. In this context, McDonald’s real estate ballast is increasingly valuable, providing a steady, defensive cash flow stream that helps offset volatility in consumption patterns.
Lessons for investors
For real estate investors, McDonald’s highlights a broader theme: some of the most compelling property portfolios sit within operating companies rather than traditional landlords. Spinoffs have historically created value in the REIT space - for example, Caesars Entertainment separated its real estate into VICI Properties, unlocking a new investment vehicle while retaining the core operating business.
These OpCo/PropCo structures show that high-quality real estate can be found in less obvious places. For long-term investors, recognising these opportunities is essential – whether or not the assets are ultimately separated into listed vehicles.
McDonald’s may never spin out its real estate. But its model underscores how property ownership can underpin the success of global businesses, delivering resilient cash flows and long-term value creation.
Behind the golden arches lies one of the largest and most influential real estate portfolios in the world – a reminder that in investing, the most valuable assets are sometimes hidden in plain sight.
Sources:
- Macquarie Asset Management Analysis, 2025.
- Workweek, 2022.
- Company Filings McDonald's 2025.
- Macquarie Asset Management Analysis. Company Filings McDonald's 2025.
- Macquarie Asset Management Analysis, Green Street 2025.
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