Starbucks Drive-Thrus in Los Angeles and Orange County achieve record pricing in the U.S.; sales continue to demonstrate strong investor demand for new construction Starbucks Drive-Thrus and buyers’ thirst to pay caffeinated prices
CORONA DEL MAR, Calif. – RealEstateRama – 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 arranged the sales of five, 2021 new construction, single-tenant net-leased retail properties occupied by a Starbucks drive-thru in separate transactions in La Palma, Redondo Beach, El Cajon, Rosamond and Modesto, California. The combined value of these five sales was $21.1 million and included five different buyers and sellers and an all-time record-low cap rate for a drive-thru-only Starbucks, and a record price per square foot and record-low cap rate for a build-to-suit Starbucks priced over $7 million in the U.S.
In the first transaction, which was located in Orange County, Hanley Investment Group’s Executive Vice Presidents Bill Asher, Jeremy McChesney and Jeff Lefko represented the seller in the sale of a rare, 20-year absolute triple-net ground lease for a new drive-thru-only Starbucks. The 895-square-foot Starbucks is located on 0.47 acres at 5014 Orangethorpe Avenue in the city of La Palma. The sale price was $2,750,000, representing a cap rate of 3.27%, a record-low cap rate for a drive-thru-only Starbucks. The seller was The Festival Companies of Los Angeles, a real estate provider, developer, owner and operator based in Los Angeles. The buyer, a private investor based in Brea, California, was represented by Mike Yim of Team Spirit Realty, Inc. of Buena Park, California.
“We generated 20 offers and selected an all-cash, non-1031 exchange buyer based in Southern California that closed at 99% of the asking price,” said Asher. “The sale set a new, all-time record cap rate for a single-tenant ‘drive-thru only’ Starbucks in the U.S.”
The La Palma Starbucks is located at the hard corner, high-traffic intersection of Orangethorpe Avenue/South Street and Carmenita Road/Moody Street, benefitting from over 45,000 cars per day. Other desirable attributes include excellent freeway accessibility to State Route 91, a major east–west state highway, a dense population of approximately 635,000 people within a five-mile radius and $136,000 average household income within a one-mile radius.
In the second transaction, McChesney, Asher and Lefko represented the seller in the sale of a brand-new single-tenant, 2,014-square-foot Starbucks café with a drive-thru on 0.55 acres at 4402 Redondo Beach Boulevard in Los Angeles County’s South Bay in the city of Redondo Beach. The sale price was $7,175,000, representing a 3.69% cap rate and $3,563 per square foot. The seller was Village Properties of Belmont, California and 2 Street Ventures, LLC of Palos Verdes, California. The buyer was a private investor based in Laguna Beach, California.
According to McChesney, “We generated multiple offers in the first two weeks of marketing and selected an all-cash, repeat Starbucks buyer based in Southern California. The sale represented a record cap rate and price per square foot for a single-tenant Starbucks drive-thru priced over $7 million nationwide.”
McChesney noted, “This was a relocation store with an outstanding existing customer base from a non-drive-thru location at the southeast corner of Artesia and Hawthorne boulevards, less than a quarter of a mile away.”
The new Redondo Beach Starbucks is situated at a high-traffic, tri-signalized intersection with 98,000 cars per day and directly across the street from the Galleria at South Bay a $900 million proposed lifestyle and mixed-use redevelopment. The Starbucks property is located less than one mile from the 405 Freeway and sits on the morning drive-side to the freeway.
In San Diego County, Asher and Lefko represented the seller in the sale of a new single-tenant, 1,700-square-foot Starbucks café with a drive-thru located on 0.36 acres at 850 N. 2nd Street in El Cajon. The sale price was $3,880,000, representing a cap rate of 3.94% and approximately $2,282 per square foot. The seller was Second & Peach Partners, LLC based in San Diego, California. The buyer, a private investor based in Orange County, California, was represented by Mehran Foroughi of NAI Capital in Irvine, California.
“The sale represented a record cap rate for a single-tenant Starbucks Drive-Thru in inland San Diego County,” said Asher. “This particular Starbucks development benefitted from a new prototype including a new walk-up window on the exterior of the building in addition to the traditional café and drive-thru format.”
The property is located in El Cajon’s dense retail corridor and has excellent exposure and visibility with prominent 20-foot-high pylon signage along 2nd Street (30,000 cars per day). Starbucks is situated just two blocks from Interstate 8 freeway with 114,800 cars per day and a half-mile to Highway 67 with 107,100 cars per day. There are 292,000 people with an average household income of $97,000 within a five-mile radius of the property.
In Kern County, Asher and Lefko represented the seller in the sale of a new single-tenant, 2,200-square-foot Starbucks café with a drive-thru located on 0.83 acres at 2544 W. Rosamond Boulevard in Rosamond. The new Starbucks is located on a pad within a Grocery Outlet-anchored shopping center with 7-Eleven and O’Reilly Auto Parts and is ideally located along Rosamond Boulevard, one of the city’s main thoroughfares with 24,000 cars per day. The sale price was $3,500,000, representing a cap rate of 4.29% and nearly $1,591 per square foot. The seller was a private investor based in Nashville, Tennessee. The buyer, a private investor from Los Angeles County, was represented by Joey Kyung Sheen Kim of eXp Realty in Irvine, California.
“We secured a buyer on a pre-sale basis and structured the closing shortly after Starbucks opened for business,” Asher said. “We achieved record pricing for a Starbucks drive-thru in Kern County and closed escrow at over 99% of the list price.”
The Starbucks in Rosamond is situated adjacent to the 14 Freeway on/off-ramps, benefiting from 30,000 cars per day and serves the nearby Edwards Air Force Base, the second largest base in the Air Force and spans 481 square miles with more than 10,000 military, federal civilian and contract personnel. The property also has prominent freeway visible pylon signage that provides excellent exposure traveling north and south along the 14 Freeway.
In California’s San Joaquin Valley, Asher and Lefko represented the seller in the sale of a new single-tenant, 1,850-square-foot Starbucks café with a drive-thru located on 0.32 acres at 906 J Street in Modesto’s historic downtown. The sale price was $3,795,000, representing a cap rate of 4.08% and approximately $2,051 price per square foot. The seller was a developer based in Los Angeles. The buyer, a local investor based in Modesto, was represented by Randy High of PMZ Commercial Real Estate in Modesto.
According to Asher, the Modesto Starbucks has excellent access and visibility along J Street and 9th Streets (40,000 cars per day) and is near Highway 99, one of the Central Valley’s primary north/south highways (128,000 cars per day). The property is ideally located in the heart of historic downtown Modesto, minutes from City Hall, the County Library, Police Department, Transit Center and the following significant area customer traffic generators: Modesto Centre Plaza, a meeting and convention center (25,000 people capacity); Modesto Junior College (17,900 students); and Gallo Center for the Arts, a state-of-the-art performing arts complex (1,688-seat venue). There are 290,000 people within a five-mile radius of the property.
According to CoStar, sales cap rates for single-tenant Starbucks drive-thru investments across the U.S. have compressed almost 50 basis points in the last two years, Asher said. Starbucks Q4 2021 consolidated net revenues were up 31% to a record $8.1 billion and comparable store sales increased 22% in the U.S, driven by a 19% increase in comparable transactions and a 3% increase in the average ticket. Starbucks closed out its fiscal year with a 21% increase in U.S. comparable store sales, driven by a 13% increase in average ticket and an 8% increase in comparable transactions.
Hanley Investment Group has completed the sale of 30 Starbucks-occupied properties in the last 24 months including 18 in 2021.
About Hanley Investment Group
Hanley Investment Group Real Estate Advisors is a real estate brokerage and advisory services company with an $8.6 billion transaction track record that specializes in the sale of retail properties nationwide. Our expertise, proven track record, and unwavering dedication to putting clients’ needs first set us apart in the industry. Hanley Investment Group creates value by delivering exceptional results through the use of property-specific marketing strategies, cutting-edge technology, and local market knowledge. Our nationwide relationships with investors, developers, institutions, franchisees, brokers, and 1031 exchange buyers are unparalleled in the industry, translating into maximum exposure and pricing for each property. With unmatched service, Hanley Investment Group has redefined the experience of selling retail investment properties. For more information, visit www.hanleyinvestment.com.
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