Hanley Investment Group Real Estate Advisors, a nationally recognized real estate brokerage and advisory firm specializing in retail property sales, announced the sale of two new construction single-tenant net-leased retail investments to two different buyers as part of a break-up sale strategy at a new retail development in Southern California’s Imperial Valley. The two buildings, which totaled 7,519 square feet and were leased by Starbucks Drive-Thru and the United States Postal Office, sold for a combined total of $5.81 million.
Hanley Investment Group’s Executive Vice Presidents Bill Asher and Jeff Lefko represented the seller and developer, 5th Street Development LLC, based in San Diego, California, in both transactions.
In the first transaction, Hanley Investment Group’s Asher and Lefko arranged the sale of a single-tenant property occupied by a Starbucks Drive-Thru built in 2022 on 0.77 acres in the city of Imperial. The new 2,089-square-foot building is located at 802 North Imperial Avenue at the hard corner, signalized intersection of State Highway 86 (North Imperial Avenue) and 15th Street. Imperial Avenue is the primary retail corridor in the Imperial Valley. Starbucks has a new 10-year lease. The buyer, a private investor from Orange County, California, was self-represented. The sale price was $2.88 million, representing a price per square foot of $1,378.65.
“We procured a repeat Starbucks investor through a broker relationship to help fulfill a 1031 exchange requirement for the buyer,” says Asher. “Single-tenant Starbucks Drive-Thru investments continue to attract consistent demand from net-lease investors due to their typical strong fundamental locations, tenant credit, and drive-thru prototype, which generates more than 70% of their business via the drive-thru.”
In the second transaction, Hanley Investment Group’s Asher and Lefko arranged the sale of a single-tenant property occupied by the United States Postal Service at 820 North Imperial Avenue in Imperial. Built in 2021 on 1.49 acres, the 5,430-square-foot building is situated between McDonald’s and a soon-to-be-built Quick Quack Car Wash. USPS has a new 10-year lease with 3% annual increases and two five-year options with annual increases. The buyer, a private partnership from Indianapolis, Indiana, was self-represented. The sale price was $2.93 million.
“We secured an all-cash 1031 exchange buyer who owned a portfolio of post office properties across the U.S.,” says Asher. “We generated a high level of interest in the property due to the annual rent increases, government credit, and the fact it was a brand-new relocation store and expansion designed to serve the region better.”
In early February 2022, Asher and Lefko represented the seller and developer in the sale of a new 20-year absolute triple-net ground lease for a new construction McDonald’s built in 2022 on 1.05 acres at 810 North Imperial Avenue, adjacent to the USPS building.
The new retail development is located across the street from Frank Wright Middle School with 1,034 students. Nearby tenants include Costco, Lowe’s, Target, Walmart, 99 Cents Only, ALDI, AutoZone, dd’s Discounts, Dollar Tree, Food 4 Less, Harbor Freight Tools, PetSmart, Planet Fitness, Ross Dress for Less, and Tractor Supply.
The properties benefit from its location on State Highway 86/Imperial Avenue, a major highway connecting Interstate 8 to San Diego and Interstate 10 to Los Angeles.
The properties serve the Imperial Valley and Mexicali (Mexico), creating a combined primary customer base of approximately 1.5 million people. According to Asher, the Imperial Valley is one of the most productive agricultural regions in the world; the total dollar value of the region’s agriculture production increased 51% over the last decade to $2.06 billion annually, outpacing inflation by over 31%.
Starbucks Drive-Thru and USPS are located approximately 15 miles north of two Calexico/Mexicali border crossings, benefiting from nearly 20 million people crossing at these ports annually. There are 190,000 people in Imperial County and 1.3 million people in Mexicali. The average household income within a three-mile radius of the property is $80,615; within a five-mile radius, there are 48,915 people.
“Even with higher interest rates and slower overall transaction velocity in 2023, single-tenant investments leased to national credit tenants will continue to trade at premium historical pricing,” says Asher.