Hanley Investment Group, a nationally recognized real estate brokerage and advisory firm specializing in retail property sales, announced today that the firm arranged the sale of a two-tenant retail building occupied by a Starbucks with a drive-thru and QDOBA Mexican Eats at 2301-2303 Hamilton Boulevard in Sioux City, Iowa. The sale cap rate for the two-tenant net-leased investment was 6.30 percent. The price could not be disclosed.
Hanley Investment Group’s Vice President Jeff Lefko and Executive Vice President Bill Asher represented the seller, N3 Real Estate of Southlake, Texas, as well as the buyer, a family trust based in Orange County, Calif.
Renovated in 2015, the two-tenant, 5,002-square-foot pad building sits on a 1.01-acre lot and features a 2,000-square-foot Starbucks with a drive-thru and a 3,002-square-foot QDOBA Mexican restaurant. The property is located at the signalized intersection of Hamilton Boulevard and 24th Street.
Lefko notes that Starbucks is well-positioned in the market for long-term success as it is only one of two Starbucks drive-thrus located in Sioux City. The other is more than eight miles away.
“We procured an all-cash, 1031 exchange buyer based in Southern California and obtained a record cap rate for a two-tenant net-leased investment in the Midwest that had approximately 65 percent of the original lease terms remaining for both tenants,” said Lefko.
“The two-tenant property offered the buyer an ease-of-management, quasi-single-tenant investment at a better yield than other single-tenant alternatives in the region,” said Lefko. “Two-tenant investments similar to this asset remain in high demand for investors as they are a nearly passive investment that can be managed from anywhere in the country.”
According to Starbucks Corporation (NASDA: SBUX) second-quarter 2019 results, the company opened 319 net new stores in Q2, yielding 30,184 stores at the end of the quarter, a 7 percent increase over the prior year; 94 percent of net new store openings were outside of the U.S. while 88 percent were licensed.
QDOBA Mexican Eats, is a leading fast-casual Mexican food brand in the U.S., with more than 750 restaurants located across the U.S. and in Canada. Committed to using quality, freshly prepared ingredients, the brand makes a range of menu items in its restaurants’ kitchens daily. Guests are encouraged to experience QDOBA’s delicious flavors by enjoying one of the brand’s signature entrées or by customizing their burritos, tacos, burrito bowls, salads, quesadillas, nachos and tortilla soup to fit their personal tastes. QDOBA was recently acquired by Apollo Global Management, LLC (NYSE: APO; S&P: A) from Jack in the Box Inc.
Last year in Sioux City, Lefko and Asher completed the sale of a single-tenant Starbucks drive-thru (the only other Starbucks drive-thru in the city) for $1.3 million and a single-tenant Texas Roadhouse for $1.85 million. They also facilitated the sale of a single-tenant Kohl’s in Cedar Rapids, Iowa, for $8.1 million.
“West coast investors continue to seek a better return in Midwest markets like Sioux City for assets leased to national credit tenants,” said Lefko. “Sioux City and other similar markets feature very low unemployment rates historically and while they may not experience huge rent growth, they are insulated from big rent declines.”
“As the retail investment market continues to transition this year, the Starbucks, Qdoba sale in Sioux City further demonstrates that investors will continue to transact at premium pricing for properties with excellent real estate fundamentals in ‘A’ locations in markets across the country,” Asher noted.