Starbucks Coffee Case Study

Like many Southern California owners our client was lucky to ride the appreciation wave over the past two decades which pushed the value of his investment properties to top of market.  As an experienced investor, he saw the opportunity to sell now and reinvest his proceeds into real estate investments with more upside. Our challenge however was to find a buyer who would pay top of the market pricing for an asset with a sub-10 year lease term and rent that was arguably 25% - 35% above market rates.  

A thorough market and rent analysis allowed us to position the property as irreplaceable due to high barriers to entry.  Although the tenant may wish to move, the complexity of obtaining a site in the market which out positioned the current location would be very difficult.  Their store sales supported that they were very profitable and although the rent may be above market, we felt that they were happy at the site.  

Nonetheless, we still had a challenge of communicating this to perspective buyers.  With the help of our rent analysis and survey of competing properties we were able to engage a group of foreign investors.  Our due diligence was extended by an easement dispute with a neighboring property owner, but ultimately our property history investigation and time spend at the city paid off.  We were able to provide evidence to the new owners that the easement could not be rescinded by the city if the neighboring owner was to redevelop their site.  

In the end, we were all happy to get this over the finish line for our long-time client.  When the dust settled, we achieved a 4.05% Cap Rate on an asset with about 6 years of term remaining and an above market rental rate.