What it takes to break a sales record

GlobeSt.com has learned exclusively that Hanley Investment Group SVP Jeremy McChesney completed the sale of 12 single-tenant 7-Eleven stores located throughout the US, from Southern California to New York and Florida in 2015, the most sold by one individual during the 12-month period, according to CoStar. Total consideration for the 12 7-Eleven stores was $16.5 million.

According to McChesney, the 12 7-Eleven stores were individual transactions and the majority of them were absolute NNN corporate-leased 7-Eleven stores. The stores were located in Buena Park, CA; Phoenix; Monument, CA; four stores in New York (two in Buffalo, one in Kenmore and the other in South Wales); Nottingham, MD; three stores in Virginia (Hampton, Norfolk and Strausberg); and Winter Park, FL. Building sizes ranged from 2,080 square feet (in South Wales, NY) to 3,000 square feet (in Buffalo, NY).

“These sales highlight the strong appetite investors have for high-quality, investment-grade net-lease properties and investors willingness to look across the country to find them,” says McChesney. “The properties had attractive fundamentals including high-profile, high-traffic locations with strong traffic counts, great proximity, ease of access to major thoroughfares and good demographics.”

7‑Eleven is the world’s largest convenience store chain operating, franchising and licensing stores in 18 countries. Some 10,500 of the 56,600 7‑Eleven stores worldwide are in North America.

So what makes these stores so compelling to investors? McChesney says that 7-Eleven stores backed by a corporate lease can offer an attractive alternative to fast-food, drug store, auto parts and bank single-tenant net-leased investments. “7-Eleven locations have a strong real estate residual value, which is very compelling to investors.”

HIG tells us according to CoStar, 97 7-Eleven properties were sold in the US during 2015 for an average cap rate of 5.54%. Twenty of those were located in California and had an average cap rate of 4.17%. Last summer, McChesney sold a 7-Eleven net-lease investment for $3.96 million in Orange County, CA, which traded at a cap rate of 3.96%, outperforming the market by nearly 40 basis points. It was a brand-new location for 7-Eleven with a new 15-year corporate-backed lease with increases. The 7-Eleven, which also had four gas pumps, was located directly across the street from Knott’s Berry Farm, the second largest theme park in Southern California.
The following month, McChesney completed the sale of a 7-Eleven in Phoenix with only six years remaining, but a strong location. The property generated 14 offers in the first week and half of marketing and was ultimately bid up over list price.
Nine of McChesney’s 12 7-Eleven transactions were located on the East Coast. One of the most recent transactions, was a 7-Eleven in Norfolk, VA, which sold at a 5% cap rate at 100% of the asking price at the end of October. Located at a busy signalized hard corner, the high-performing corporate 7-Eleven had 13 years remaining on the primary term of the lease with two increases every five years. The all-cash buyer was from California.
“The East Coast deals were representative of capital from the West Coast moving east in search of a better return, which we expect to continue across the board in multi-tenant and single-tenant retail in 2016,” says McChesney.
In Monument, CO, McChesney negotiated the sale of a 7-Eleven absolute triple net-lease investment with more than eight years remaining on the primary term of the corporate lease with increases every five years. The store had a 38-year operating history at that location. The buyer, which was from Southern California, closed at a cap rate of 5.38%.
With nearly 100 7-Eleven properties trading hands during 2015, does McChesney expect sales volume for single-tenant 7-Eleven net-leased investments to stay strong in 2016? “With an AA- credit rating, zero land responsibilities and a lack of alternative investments, single-tenant 7-Eleven stores will continue to be one of the most highly sought-after retail investments in today’s market.” McChesney is representing the owners of multiple 7-Eleven properties available for sale, including a high-profile one in Orlando.

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