SBA 504 Feasibility Study Case Study: An Owner-Occupied Restaurant and Inline Retail Building on the MLK Boulevard Corridor in New Bern, North Carolina, Feasible as Resized and Recapitalized

A new owner-occupied retail building proposed on a C-3 outparcel on the Dr. Martin Luther King Jr. Boulevard corridor in New Bern, North Carolina, a regional hub city whose retail sales exceed its residents' spending by $561 million and whose corridor lost a Walgreens in December 2024 while a Biscuitville opened, a Smithfield's rebuilt and a Sheetz broke ground. The sponsor's proposal of a 7,500 SF building with a 4,500 SF family restaurant and 3,000 SF of inline space on 1.6 acres at a $4,937,250 cost fails twice: it leases 40 percent of the building permanently against the 20 percent cap for new construction under 13 CFR 120.131(a), and it covers at 0.91x in Year 3 at the 15 percent borrower contribution the program requires of a new operating entity. Resized to 6,000 SF, a 3,700 SF restaurant and 2,300 SF of inline space on 1.0 acre at a $3,828,900 cost, the building passes the occupancy test at 61.7 percent with one 1,200 SF suite leased permanently and one 1,100 SF suite leased on a three-year term the operator absorbs, and at a 25 percent borrower contribution it covers at 1.27x in Year 3, 1.26x in Year 4 and 1.29x in Year 5; at the 15 percent minimum it covers at 1.13x and does not reach 1.25x within five years. Determination: not feasible as proposed; feasible as resized and recapitalized, conditioned on an NCDOT count on the corridor at or above the underwriting basis, the parcel's C-3 zoning and site plan approval with the NCDOT driveway permit, a written water and sewer system development fee quote, and the source of the operator's 25 percent injection.

Model study prepared by MMCG Invest | Michal Mohelsky, J.D., FMVA | October 3, 2026

MMCG concludes that the proposed restaurant and inline retail building on the MLK Boulevard corridor in New Bern is not feasible as proposed and is feasible as resized and recapitalized. The proposal fails on two independent grounds. The first is eligibility. The 7,500 SF program places the restaurant in 4,500 SF, exactly 60 percent of the building, and leases the remaining 3,000 SF to third parties on standard retail terms. Under 13 CFR 120.131(a) a borrower whose loan funds new construction must occupy at least 60 percent on completion, may permanently lease no more than 20 percent, and must occupy some of the remainder within three years and all of it within ten. A 40 percent inline program leased permanently is twice the cap, and no lender or CDC will submit it. The second is coverage. At a $4,937,250 total project cost, $658 per SF, and the 15 percent borrower contribution the program requires of an Operating Company that has not yet operated for two years, the building covers its combined first-mortgage and debenture service of $363,769 at 0.91x in Year 3 and 0.96x in Year 5, and the restaurant would have to sell $1,827,395 in Year 3, 118 percent of forecast, to reach 1.25x.

Resized to 6,000 SF on 1.0 acre at a $3,828,900 total project cost, with the restaurant in 3,700 SF, Suite A of 1,200 SF leased permanently and Suite B of 1,100 SF leased for three years with the operator taking 400 SF of it in Year 4 for a private dining and catering kitchen, the building passes the occupancy test at 61.7 percent with the permanent lease at the 20 percent line, and its cost falls by $1,108,350. At the 15 percent minimum contribution the resized building covers at 1.13x in Year 3 and 1.15x in Year 5, which is a credit a CDC may carry but a bank first-mortgage lender will not. At a 25 percent contribution, a $1,914,450 first mortgage and a $957,225 debenture against $957,225 of equity, the building covers at 1.06x in Year 2, 1.27x in Year 3, 1.26x in Year 4 after the operator absorbs part of Suite B, and 1.29x in Year 5. The Year 1 shortfall of $88,217 is funded from a $150,000 reserve carried in the project cost. MMCG recommends the 25 percent structure as the determination because the program's minimum contribution is a floor on eligibility, not a finding on credit, and because the restaurant's own economics, a 22 percent EBITDAR margin on $405 per SF, are already at the upper end of what the public family-dining benchmarks support. The determination is conditioned on an NCDOT classified count on the MLK Boulevard segment at or above the underwriting basis of 24,000 vehicles per day, confirmation of the parcel's C-3 zoning and site plan approval with the NCDOT driveway permit, a written water and sewer system development fee quote from the City of New Bern, and documentation of the source of the operator's injection.

This is an MMCG model study: a complete feasibility analysis of an owner-occupied restaurant and inline retail building on a model parcel in a real market, prepared with public data to show SBA 504 lenders, CDCs and sponsors how MMCG tests a new-construction retail project against the occupancy rule, the trade area, the corridor's competitive record, the cost of construction and the program's equity tiers before the site plan is drawn. It is not a client engagement. The parcel is a model site described by its acreage, zoning and corridor; MMCG has no relationship with any landowner, broker or sponsor on the corridor, and the analysis does not represent an offer, an appraisal or a recommendation to buy any parcel. Figures drawn from the U.S. Census Bureau, the East Carolina University Bureau of Business Research's 2023 retail market analysis for the city, the City of New Bern's fee schedule and planning records, Craven County's tax records, the Bureau of Labor Statistics, Rider Levett Bucknall, Cushman & Wakefield and the public filings and franchise disclosures of family-dining chains are identified as such. Figures labeled MMCG assumption or MMCG estimate are underwriting inputs set by MMCG from industry benchmarks, and items that could not be verified from a primary source at the study date are listed in the Conditions and Limitations section rather than estimated silently. In particular, the NCDOT count on the MLK Boulevard segment, the asking price of any specific parcel on the corridor, the City's water and sewer system development fees, a per-square-foot hard cost for small retail construction in eastern North Carolina, and the May 2025 New Bern wage vintage were not confirmed from primary sources at the study date and are carried as stated assumptions.

The Project will operate as a full-service family restaurant owned and occupied by the borrower's Operating Company in a new 6,000 SF single-story building on a 1.0-acre C-3 parcel on the MLK Boulevard corridor in New Bern, with two inline suites leased to retail or service tenants. The physical program as resized comprises a 3,700 SF restaurant with 125 seats in a dining room and counter, a 1,100 SF kitchen with a Type I hood, grease interceptor and walk-in cooler and freezer, restrooms, an office and dry storage; Suite A of 1,200 SF with storefront glazing, a demising wall and a 100-amp service, delivered as a white box for a service or retail tenant on a permanent lease; Suite B of 1,100 SF delivered the same way and leased for a three-year term, with 400 SF of it taken into the restaurant in Year 4 as a private dining room and catering kitchen and the balance re-let on short terms until the operator occupies all of it within the regulation's ten years; a 55-space parking field at 9.2 spaces per thousand SF of building, inside the City's requirement for the restaurant use; a monument sign on the MLK frontage; and a full-access driveway under an NCDOT permit. The restaurant will operate from 6:00 a.m. to 10:00 p.m. seven days a week with a general manager, two assistant managers and about 22 full-time-equivalent kitchen, service and support staff for 25 FTE. The sponsor will hold the land and building in an Eligible Passive Company that leases the whole property to the Operating Company on a written lease subordinate to SBA's lien for the term of the loan, with the Operating Company subleasing Suites A and B, guaranteeing the loan and carrying the principals' personal guarantees. The Project is positioned as the full-service, sit-down family restaurant on a corridor whose recent food openings are quick-service and drive-through, serving the regional customer that the city's $561 million retail surplus represents, the corridor's daytime employment at the hospital district and the two anchors, and the 24.5 percent of city residents aged 65 and over who make up the family-dining segment's core.

Marketing and Sales Strategy

The launch is built on the corridor's own traffic and the city's regional draw. Pre-opening marketing runs through the New Bern Area Chamber of Commerce, the hospital and school employers along MLK and Neuse Boulevard, local radio and the operator's social channels, with a soft opening week for corridor employers before the public opening. The restaurant carries a breakfast and lunch program for the daytime trade, a senior and early-dinner program for the resident base, catering to the hospital district, the base at Cherry Point and the county's churches and civic groups from Year 1 with the Year 4 catering kitchen as the expansion, and a loyalty program on the point-of-sale system. The inline suites are marketed by a local broker from the start of construction to service and retail users whose customers are already on the corridor, an insurance agency, a cellular store, a nail salon, a tax preparer or a medical or dental satellite, at $20 per SF triple net against corridor asks of $9 to $21.

Amenities

The subject is a model 1.0-acre parcel zoned C-3 on the MLK Boulevard corridor, carried at $400,000 per acre, or $400,000, as an MMCG estimate for an arterial outparcel between the S. Glenburnie Road intersection and the Walmart and Target anchors; no listing on the corridor was retrieved, and the price is a disclosed assumption. C-3 is the City of New Bern's arterial commercial district. The staff report for the 2025 rezoning of 13.54 vacant acres at 3530 Neuse Boulevard from C-4 to C-3 (REZ-003020-2025) states that C-3 districts will generally be located on the city's major radial roads, and the city has moved corridor parcels into C-3 in at least five cases between February 2025 and September 2026, including a 0.248-acre R-6S to C-3 case on Oaks Road, an I-1 to C-3 case on Red Robin Lane, a city-initiated case to cure split zoning on Neuse Boulevard and S. Glenburnie Road, and a 10.68-acre annexation at 4301 US Highway 70 East zoned C-3 for a planned auto center. The Development Review Committee's comments on the Neuse Boulevard case name the NCDOT driveway permit as a condition, and the study carries the same condition for the subject.

MLK Boulevard is US 17 Business and the city's primary retail arterial. It carries the Walmart Supercenter at 3105, the New Bern Mall of 361,000 SF at 3134, the CVS at 3311, Mr. Tire at 3301, Target with a CVS inside at 3410, the Aldi at 3550, the Harris Teeter center at New Bern Marketplace of 330,000 SF at 3561, the Biscuitville at 3571, and the former Walgreens site at 3500 at the S. Glenburnie intersection where Sheetz has dug its footprint. No published NCDOT count on the segment was retrieved. NCDOT's 2024 AADT station shapefile covers 48,687 stations with history from 2002 to 2024 and New Bern is counted on the even-year urban cycle, so the count exists; the New Bern Area MPO's Navigate 2050 draft of October 2025 says only that US 17 Business and NC 55 Business carry above-average volumes and that Glenburnie Road stands out for its disproportionately large traffic levels. MMCG's underwriting basis of 24,000 vehicles per day on the MLK segment is an estimate, stated as such and carried as a condition; a broker listing's figure of 18,000 for S. Glenburnie Road was noted and excluded from the evidence set.

New Bern is the seat of Craven County and the regional retail and medical hub for Craven, Jones and Pamlico counties. The city's 2025 population estimate is 34,724, up 10.9 percent from the 2020 Census count of 31,291, in 14,673 households averaging 2.20 persons, with a median household income of $61,031 and a per capita income of $38,196 in 2024 dollars, 24.5 percent of residents aged 65 and over, 22.4 percent under 18, and a poverty rate of 17.3 percent. The 2022 Economic Census recorded $1,323,049,000 of retail sales in the city, $41,980 per resident, $180,697,000 of accommodation and food services sales, and $895,063,000 of health care and social assistance receipts. A city of 35,000 that sells $1.3 billion of retail and bills $895 million of health care is selling to a region, and the trade area for a full-service restaurant on its primary arterial is the three-county region, not the one-mile ring.

The East Carolina University Bureau of Business Research's 2023 retail market analysis for the city, built on Esri's 2022 retail marketplace estimates, measures the position. Across all retail and food and drink the city shows resident demand of $381,729,188 against supply of $942,597,107, a surplus of $560,867,919; Craven County shows a surplus of $227,781,667 and the New Bern metropolitan area a surplus of $87,744,130. For restaurants and other eating places the city's residents demand $33,766,176 and the city's restaurants sell $70,477,102, a surplus of $36,680,926; the county shows a surplus of $10,237,295 and the metropolitan area a leakage of $4,003,038. The study's own conclusion is that unmet demand is still flowing out of Craven County and out of the larger metropolitan trade area. MMCG reads the three geographies together: the city's restaurant surplus is the regional draw, the county's smaller surplus shows the draw thinning at the county line, and the metropolitan leakage of $4.0 million is the demand that leaves the region for lack of the product. The subject's capture is reasoned from the corridor's share of that regional flow rather than from the city's surplus, which is already spoken for by the restaurants that created it, and the restaurant's $1,500,000 stabilized volume is 2.1 percent of the city's restaurant sales and 37 percent of the metropolitan leakage, a figure the study presents as a cross-check rather than a derivation.

Two flags in the public study are carried. Its narrative describes a food and drink leakage of $41.1 million where its own Table 2.1 reports a surplus of the same magnitude, and in its metropolitan table the columns headed demand and supply repeat the city and county gaps, so that only the third column is the metropolitan gap; MMCG has used the tables, not the narrative, and the third column. The underlying figures are Esri estimates rather than observed sales.

MMCG identified the corridor's anchors and verified its food, pharmacy and auto service openings and closings from the operators' own pages, the city's permit and board records and local reporting.

Competitor Number 1 Biscuitville, 3571 Dr. MLK Jr. Boulevard Quick-service breakfast and lunch at the New Bern Marketplace frontage, opened March 19, 2024. The operator's first-anniversary release reports more than 187,000 biscuits sold in the first year. It is the most recent food opening on the corridor and the evidence that the corridor supports a new food build.

Competitor Number 2 Smithfield's Chicken 'N Bar-B-Q, Dr. MLK Jr. Boulevard A regional quick-service operator rebuilding on the corridor in a new building targeted for completion at the end of October 2026 per the WCTI business report; its current listing is 2507 Dr. MLK Jr. Boulevard.

Competitor Number 3 Bamboo Quick & Fresh, 3820 Dr. MLK Jr. Boulevard A quick-service Asian concept reported as pending final inspection and about a week from opening in the same WCTI report.

Competitor Number 4 Sheetz, 3500 Dr. MLK Jr. Boulevard at S. Glenburnie Road A 6,132 SF convenience store and restaurant with twelve fueling positions on the former Walgreens site, bid closed June 29, 2026, footprint dug by Labor Day 2026, opening targeted for early 2027. It is the corridor's next food and fuel competitor and will take breakfast and lunch trips at the intersection nearest the subject.

Competitor Number 5 New Bern Mall food and inline tenants, 3134 Dr. MLK Jr. Boulevard A 361,000 SF enclosed mall whose Bath & Body Works consolidated into the Harris Teeter center on October 25 per WCTI. The mall's food court and sit-down tenants are the corridor's existing full-service and casual supply alongside the restaurants clustered at the Walmart and Target entrances.

Competitor Number 6 Walgreens, 3500 Dr. MLK Jr. Boulevard (closed) Closed permanently on December 3, 2024 with prescriptions moved to the Neuse Boulevard store. Two CVS stores remain in operation at 3311 MLK and inside the Target at 3410 MLK, three tenths of a mile apart. The closure confirms the public study's $28.3 million health and personal care surplus and is the reason the study did not test a pharmacy or medical retail concept for the subject.

Competitor Number 7 Mr. Tire Auto Service, 3301 Dr. MLK Jr. Boulevard, and the planned DGT Ventures auto center, 4301 US Highway 70 East The corridor's auto service supply and the 10.68-acre auto center annexed in September 2025 about four miles east, which together argue against an auto service concept for the subject despite the metropolitan auto parts leakage of $4.1 million.

The corridor's asking rents frame the owner-occupancy case. Older strip space at Berne Square, built in 1973, asks $9 to $12 per SF; 1970-vintage space at 1904 to 1918 MLK asks $15; 3918 and 3715 MLK ask $14 and $15; 2007-vintage space at 3956 to 3968 MLK asks $18; waterfront space at 100 Marina Drive asks $21; and a 12,838 SF building at 4110 MLK is offered for sale at $1,400,000, about $109 per SF. A new 6,000 SF building at $638 per SF all-in cannot be justified on any rent the corridor pays, which is why the subject is an owner-occupied project: the restaurant's business, not the rent, carries the cost, and the inline suites at $20 per SF are a contribution to building expense rather than the credit. No retail building announced, permitted or under construction within the corridor was identified beyond the Sheetz, the Smithfield's rebuild and the Bamboo opening, and the 315-acre and 98-acre C-3 rezonings at the US 70 and NC 43 interchange are future supply at the western edge of the trade area that the study notes rather than models.

Under 13 CFR 120.131(a), where SBA financing funds new construction, the borrower must permanently occupy and use at least 60 percent of the Rentable Property on completion, may permanently lease up to 20 percent to others, and must plan to occupy some of the remaining space within three years and all of it within ten. Under 120.131(b) the test for an existing building is 51 percent occupied and up to 49 percent leased. The rule applies to both 7(a) and 504, and where an Eligible Passive Company leases the whole property to an Operating Company, the Operating Company must meet it.

The proposal's inline program is not a tenancy the regulation permits. The resize moves the permanent lease to the 20 percent line, documents the operator's expansion into Suite B with a dated plan the CDC can hold the borrower to, and gives the lender an occupancy certificate at completion that reads 61.7 percent on the architect's measured rentable area. The study recommends that the Suite B lease be written for three years with no renewal option and that the Operating Company's lease with the EPC name the Year 4 expansion.

The sponsor holds the real estate in an Eligible Passive Company under 13 CFR 120.111 and operates the restaurant through a newly formed Operating Company. The study documents each condition: the EPC uses proceeds only to acquire land and construct a building it leases to the Operating Company; both entities are small under Part 121; the lease is written, subordinate to SBA's lien, with rents assigned as collateral and the EPC's rent capped at the loan payment plus taxes, insurance and maintenance; the lease term including the Operating Company's options is at least 25 years; the Operating Company guarantees the loan; every 20 percent owner of either entity guarantees; and the loan counts against the limits of both entities. The Operating Company subleases Suites A and B, and the sublease income is EPC-level income that the study carries separately from the restaurant.

The building is general-purpose collateral. A restaurant is not on SBA's special-purpose list, so the 15 percent tier under 13 CFR 120.910(a)(2) for a limited or single-purpose building does not apply; the tier that applies is 120.910(a)(1), 15 percent because the Operating Company has operated for two years or less. An established restaurant group opening a second location through the same structure would sit at 10 percent. The study's recommendation of a 25 percent contribution is a credit finding, not a program requirement, and is explained under Determination.

The 504 job standard requires one job created or retained per $95,000 of debenture. At the recommended structure the $957,225 debenture requires 10.1 jobs and the restaurant's 25 FTE meet it twice over; at the 15 percent structure the $1,340,115 debenture requires 14.1 jobs and is also met. No public policy goal is needed. Fiscal 2027 debenture fees are 0.50 percent upfront and 0.203 percent annually, and the 25-year debenture applies because real estate is more than 51 percent of proceeds.

The parcel's C-3 zoning, the City's site plan review, the Development Review Committee's comments and the NCDOT driveway permit on US 17 Business are conditions. C-3 permits restaurants and retail by right; the City's fee schedule carries a $400 site plan review, a $150 commercial plan review and a $50 zoning compliance letter, and the study carries no special use permit because none is required for the use. The restaurant's parking at the City's ratio and the shared field for the suites are inside the 55 spaces on the resized plan. A full-access driveway with a left-in from the MLK median is assumed; if NCDOT restricts the parcel to right-in, right-out, the study's capture rate falls and the sensitivity table's 10 percent sales case is the reference.

Water and sewer are City of New Bern services. The fee schedule refers system development and connection fees to the current rate ordinance and the Water Resources Service Coordinator, and the board's 2026 restatement bills specialty commercial connections at actual cost plus a 10 percent administrative fee, so the restaurant's fees, which are driven by projected daily flow, are quote-only; the study carries $60,000 as an MMCG estimate inside the permit and fee line and conditions the determination on the written quote. The City's commercial building permit is $800 for the first 1,000 SF plus $0.25 per SF, $2,050 for the resized building, with electrical at $125 plus $0.10 per SF, plumbing at $125 plus $10 per fixture, mechanical at $125 per unit, fire plan review at $75 and sprinkler review at $100 plus $2 per head. A Phase I Environmental Site Assessment under ASTM E1527-21 and a geotechnical report are carried in the land closing line. Property tax is carried at $25,044 in Year 1 on an assessed value of $3,000,000, an MMCG estimate of the assessor's value for the land and improvements, at the combined city rate of $0.3900 and county rate of $0.4448 per $100, $0.8348 in total, on Craven County's 100 percent assessment ratio set at the January 1, 2023 countywide revaluation on a four-year cycle; the parcel is outside the downtown Municipal Service District and carries no MSD levy. Taxes are due September 1 with interest from January 6.

Source: U.S. Census Bureau; East Carolina University Bureau of Business Research, Retail Market Analysis, City of New Bern, 2023; MMCG estimates.

The one-mile ring supplies the breakfast and lunch trade from the corridor's employers and the two anchors; the regional customer supplies the dinner and weekend trade; and the county's residents aged 65 and over supply the early-dinner and weekday base.

Restaurant sales are modeled at $1,500,000 at stabilization in Year 3, $405 per SF of restaurant and about $12,000 per seat, ramping from $1,200,000 in Year 1 and $1,380,000 in Year 2 and growing 3 percent in Year 4 and 2.5 percent in Year 5. The figure is set between the public benchmarks for the segment. Huddle House's franchise disclosure dated September 30, 2025 reports a system average unit volume of $774,871 across 261 units for a small-footprint 24-hour family concept, with the top decile at $1,421,313. Denny's reports franchise average unit sales of $1,875,000 for fiscal 2024 for a 24-hour family concept in a building of about 4,500 SF. Cracker Barrel reports an average restaurant volume of $4,199,100 for fiscal 2025 in a 10,000 SF prototype and Golden Corral reports small-market averages of $3,698,944, both too large to govern a 3,700 SF independent. MMCG carries the subject at 80 percent of the Denny's franchise average as the base case, the Huddle House top decile as the downside and the Denny's figure as the upside, and reasons the base case from the corridor's regional draw and the absence of a full-service family competitor among the corridor's recent openings.

Cost of goods is modeled at 31 percent of sales from Year 2 and 32 percent in Year 1, above Cracker Barrel's 26.4 percent restaurant cost of goods because an independent buys without the chain's purchasing scale. Payroll and burden is modeled at 33 percent of sales at stabilization, 35 percent in Year 1 and 34 percent in Year 2, against Cracker Barrel's 36.0 percent of total revenue and an owner-operated independent's lower management layer, on a New Bern wage base of $14.68 for cooks, $12.77 for servers including reported tips, $15.10 for bartenders, $18.66 for first-line supervisors, $12.07 for dishwashers and $30.64 for food service managers at the May 2023 vintage, escalated 3 percent a year to the opening, with a general manager at $65,000 and two assistant managers at $44,000. Other operating expense is modeled at 14 percent of sales at stabilization: utilities at 3.2 percent, card fees at 2.3 percent, marketing at 2.0 percent, supplies and linen at 1.8 percent, repairs at 1.2 percent, administrative and licenses at 1.5 percent, the restaurant's share of insurance at 1.1 percent and other at 1.0 percent. The resulting restaurant EBITDAR of 22 percent of sales at stabilization compares to restaurant-level operating margins of 11.4 to 13.0 percent at Denny's and 11.4 percent for the bottom quintile of small-market Golden Corrals, both of which are stated after occupancy cost of about 7 to 9 percent of sales; the subject carries its occupancy cost in the building lines. An imputed market rent of $20 per SF on the restaurant's 3,700 SF, $74,000 or 4.9 percent of sales, is carried as a check and shows that the business could pay a third party for the space at the corridor's new-construction rent.

Suites A and B are modeled at $20 per SF triple net against the corridor's 2007-vintage ask of $18 and the LoopNet market average of about $21, with Suite A leased from the seventh month of Year 1 and Suite B from the start of Year 2, 92 percent economic occupancy from Year 3, and the operator taking 400 SF of Suite B at the start of Year 4. Base rent is $42,320 at stabilization and $34,960 from Year 4. Tenants reimburse their 38.3 percent share of property tax, insurance and common area cost, falling to 31.7 percent from Year 4, and the study carries a 4 percent management fee on inline rent and a $30 per SF tenant improvement allowance in the project cost. The suites contribute about 4 percent of total revenue and roughly cover the building's tax, insurance and common area cost, which is their role in an owner-occupied project.

Location: Dr. MLK Jr. Boulevard (US 17 Business) corridor, New Bern, NC 28562 Size in SF (Gross): 6,000

Source: Marshall & Swift CoreLogic, MMCG

The shell at $185 per SF sits below Rider Levett Bucknall's first-quarter 2026 Charlotte range of $200 to $285 per SF for strip retail because the subject is a single-story building on a flat coastal-plain site with no structured parking, and above Cushman & Wakefield's 2026 Southeast in-line retail fit-out benchmark of $126 per SF, which is a tenant fit-out figure and not a shell. The restaurant fit-out at $125 per SF over the shell brings the restaurant's own space to $310 per SF of hard cost before equipment, inside the $250 to $450 per SF range a Wilmington contractor publishes for ground-up restaurant construction in 2026, a range the study treats as low-confidence and uses only to bracket. RLB's national index rose 4.45 percent in the year to July 2026 with the latest quarter the highest in two years and liquid asphalt up 16.4 percent, and the paving line is carried at $5,500 per space on that basis. The reserve of $150,000 is sized to the Year 1 shortfall of $88,217 at the recommended structure with about $62,000 of margin. The proposal is carried at $4,937,250: 1.6 acres at $640,000, a 7,500 SF shell, a 4,500 SF restaurant fit-out, 75 spaces at $412,500, $502,500 of equipment and a $200,000 reserve.

Loan Assumptions (resized, recommended structure)

The proposal would have carried a $2,468,625 first mortgage and a $1,728,038 debenture at the 15 percent tier, $363,769 of annual debt service, against Year 3 cash flow available for debt service of $332,657.

The Project is an eligible new-construction real estate project under the SBA 504 program at 13 CFR 120.880 through 120.882, with the Eligible Passive Company leasing the Project Property to the Operating Company as 120.880 permits. The occupancy test of 120.131(a) is met at 61.7 percent with 20.0 percent permanently leased and a dated plan for the remaining 18.3 percent. The borrower contribution is at least the 15 percent that 120.910(a)(1) requires of an Operating Company that has operated two years or less, and the study recommends 25 percent. The debenture is within the $5,000,000 limit of 120.931 and the 25-year maturity applies because real estate exceeds 51 percent of proceeds. The job standard of one job per $95,000 of debenture is met by the restaurant's 25 FTE. Each EPC condition of 120.111 is documented, the Operating Company guarantees, and every 20 percent owner guarantees. SBA may require a feasibility study under 120.160(b) and the lender has requested one because the file rests on projections for a new business; SOP 50 10 8.1, in force for loans numbered on or after October 1, 2026, leaves that decision with the lender and CDC. Fiscal 2027 fees of 0.50 percent upfront and 0.203 percent annually on the debenture are carried.

Payroll of $495,000 at stabilization covers a general manager at $65,000, two assistant managers at $44,000 and about 22 FTE of cooks, servers, hosts and dishwashers at a blended $14.50 an hour plus reported tips, with an 18 percent burden, across two shifts seven days a week, escalating 3 percent a year. Year 3 operating expenses are 78.6 percent of total revenue, of which the restaurant's own cost structure is 78.0 percent of restaurant sales; the building lines of tax, insurance and common area cost are $56,044 against $62,085 of inline rent and recoveries, so the suites carry the building. Property tax at $8,348 per million of assessed value is about half the rate an equivalent building would carry in Illinois or Indiana, which is the North Carolina advantage in this projection.

The Year 1 shortfall of $88,217 is funded from the reserve. The Project covers from Year 2 at 1.06x, reaches 1.27x in Year 3, dips to 1.26x in Year 4 as the operator absorbs 400 SF of Suite B and forgoes its rent, and builds to 1.29x in Year 5. At the 15 percent minimum the same cash flow covers at 1.13x in Year 3 and 1.15x in Year 5, which is why the study recommends the larger contribution. Year 3 EBITDA of $334,348 is an 8.7 percent yield on total project cost. As proposed, the same demand in a 7,500 SF building at $4,937,250 produces Year 3 cash flow available for debt service of $332,657 against debt service of $363,769, coverage of 0.91x, and Year 5 coverage of 0.96x that never reaches 1.0x within the projection.

At Year 3 cost ratios the restaurant's fixed cost, salaried management, minimum staffing, utilities, insurance, administration and marketing, is $345,000, and its variable cost of goods, hourly labor, card fees and supplies is 55 percent of sales, so each dollar of sales contributes 45 cents before the 1 percent FF&E reserve. The building's tax, insurance, common area cost and management fee net of inline rent and recoveries contribute $2,848 at stabilized inline occupancy. Thresholds are stated as a share of the Year 3 forecast of $1,500,000 of restaurant sales.

The restaurant covers its operating cost at about half of forecast and its debt at 90 percent of forecast under the recommended structure. The ten extra points of equity are worth about seven points of break-even sales at 1.0x and six at 1.25x. That is the shape of an owner-occupied restaurant credit a CDC can defend: the business clears its own costs with a wide margin, and the equity is sized so that the building's debt sits inside the restaurant's normal variance rather than at the edge of it.

The resized and recapitalized Project holds coverage at or above 1.0x in every single-factor case except a 15 percent sales shortfall, at 0.87x, and above 1.25x only in the base and upside cases, which is the honest profile of a new independent restaurant at 75 percent leverage. A 10 percent sales shortfall sits at the 1.00x break-even, and the combined case of a 10 percent sales shortfall and a 3-point labor overrun falls to 0.84x. The 15 percent row and the as-proposed row are the determination.

The determination of not feasible as proposed and feasible as resized and recapitalized is subject to the following conditions precedent on the resized program:

The following items could not be verified from a primary source at the study date and are disclosed: the NCDOT count and truck share on the MLK segment, in place of which the study carries an estimate; the asking price and the specific parcel, in place of which the study carries a model parcel at $400,000 per acre; a per-square-foot hard cost for small retail or restaurant construction in eastern North Carolina from a cost consultancy, in place of which the study carries the Charlotte strip range, the Southeast fit-out benchmark and a contractor's published range; per-project permit valuations for the Sheetz, Biscuitville and Smithfield's buildings on the corridor, which the City's monthly reports aggregate; the City's water and sewer system development fees; the lease type and posting date of the corridor's asking rents, which the listing platforms do not display, and the conflicting monthly rent shown for 2507 MLK; the one-, three- and five-mile demographic rings, in place of which the study carries the city and the public study's three geographies; the May 2025 New Bern wage vintage, in place of which May 2023 wages are escalated; the next Craven County revaluation date; and the year of the 315-acre and 98-acre NC 43 connector rezonings.

This model study applies the methodology described on MMCG's SBA retail feasibility study and retail feasibility study pages. MMCG prepares retail and restaurant feasibility studies for SBA 7(a) and 504, USDA Business and Industry and conventional lenders nationwide, with engagements from $4,900 and delivery in 9 to 16 business days.