Hanley Investment Group Real Estate Advisors, a nationally-recognized real estate brokerage and advisory firm specializing in retail property sales, announced today that the firm has completed the sale of a new construction single-tenant corporate Starbucks with a drive-thru located in Los Angeles, less than one mile from the University of Southern California (USC) campus. The sale price of $3,538,000 represented a cap rate of 3.82 percent.
Hanley Investment Group Executive Vice Presidents Bill Asher and Jeremy McChesney and Vice President Jeff Lefko represented the seller and buyer in the transaction. The seller was a private developer based in Phoenix, Arizona. The buyer was a private investor based in Los Angeles.
Built in 2017, the 1,486-square-foot Starbucks building with a drive-thru is situated on a .27-acre parcel at the northeast corner of Western Avenue and Jefferson Boulevard at 1789 W. Jefferson Boulevard in Los Angeles. The single-tenant corporate Starbucks has over 19 years remaining on the primary lease term on a rare 20-year absolute NNN lease with 10-percent rental increases every five years.
According to Asher, “We successfully procured a very qualified local buyer within the first two weeks of formally marketing the asset and closed at 99.5 percent of the asking price. We negotiated a 10-day due-diligence review and a 30-day escrow.”
McChesney adds, “The Los Angeles-based purchaser was an all-cash 1031 exchange buyer that understood the long-term overall value of the location, as the property is a rare drive-thru location within an area of Los Angeles zoning with high barriers to entry for new city-approved drive-thru sites.”
Located at the signalized intersection of Jefferson Boulevard and Western Avenue with an average daily traffic count of 50,000 cars per day, the property is approximately two miles from the Interstate 10 (311,000 CPD) and Interstate 110 (269,000 CPD) freeway on/off ramps and is the only drive-thru Starbucks in a two-mile radius. More than 1.3 million people reside within a five-mile radius of the property.
USC is home to more than 44,000 students with $562 million spent in the local community from USC-related student expenses. USC is also the largest private employer in the city of Los Angeles with 42,315 Los Angeles County jobs, which generates $8 billion annually in economic impact for Los Angeles County and California.
“Over 60 percent of all store sales at a Starbucks now come through the drive-thru, which is why 80 percent of all new locations nationally for Starbucks include a drive-thru,” said Lefko. “It’s a significant reason why single-tenant Starbucks investments continue to be one of the more sought-after triple-net assets from private investors across the country. Corporate Starbucks sites typically offer strong underlying real estate fundamentals combined with a long-term corporate guaranteed lease and rental escalations, providing investors with a secure income stream and a hedge against inflation.”
Asher adds that absolute triple-net leases have nearly zero landlord responsibility, which is another benefit that is appealing to private investors seeking a hands-off passive investment and a major reason this particular Starbucks in Los Angeles commanded the first-class price.
Asher notes that Hanley Investment Group has listed, sold or currently has in escrow more single-tenant coffee investments in California in the last 18 months than any other brokerage company with a total of 17 properties valued at over $50 million.