Net Lease Investment Services
Single Tenant Net Lease Investment Overview
Fall 2013
Big Picture Update Limited Availability Driving Action for New Net Lease Property Types Investment activity surged at the close of last year. The looming impact of tax changes brought many sellers back into the market— While Walgreen’s or McDonald’s might still be at the top of most looking to cash out of their investments before new tax hikes kicked in wish lists, more buyers are seeking net lease investment of any either at the federal or state level (or both). Since that time, however, type. This is fueling the rise of interest in a slew of retail types for investment activity has fallen by roughly 25% and kept a relatively which there was only minimal net lease activity just a few years ago. steady pace. The challenge for nearly all asset classes has been the This range from health clubs to other freestanding restaurant types lack of available quality properties for sale. Though investors are outside of the fast food arena, but among the strongest growth has slowly ratcheting up their tolerance of risk, it still remains low. As been in the field of dollar stores and convenience stores. That is such, demand is highest for core assets regardless of the property why we have begun tracking trends for these property types starting type. In the office arena, this is CBD Class A office (preferably in with this issue and have forensically compiled gateway cities). For industrial product, it is historical stats for these asset classes going modern distribution space—typically single back a number of years. tenant and with long-term leases in place to While the investor top credit tenants (in other words, premium The rise in interest in dollar and convenience industrial net lease properties). In the retail emphasis may still be stores as a net lease investment types is all arena, this emphasis on security over yield about availability. With a shortage of quality security over risk, the has focused on trophy shopping centers… available assets in place for virtually every or premium net lease investment. Lastly, tolerance for risk class of net lease investment, these two multifamily product—which has seen the product types are continuing to see some of continues to increase greatest overall improvement in underlying the most aggressive expansion in the retail fundamentals of any commercial real estate as economic and world. We tracked over 1,800 new dollar asset class—has seen a surge in demand for stores that were opened in the United States retail fundamentals nearly all classes and types, with investment last year, with chains like Family Dollar, Dollar grade properties leading the way and valueimprove. General and Dollar Tree all averaging annual add product bringing up the rear. unit growth of 300 new stores or more. Dollar General alone opened about 600 stores last So where does that leave us in terms of year and should close 2013 with about 635 new locations—in other net lease investments? Obviously, a continued investor focus on words, typically two new store openings each day this year. They security over yield is bound to put these assets firmly in the sights have been on a 600 new store annual pace going on three years now of buyers. The challenge, of course, has been in finding available and expect a similar level of growth in 2014. We estimate just over quality product. The gold standard still remains drug store and half of those to be in freestanding retail buildings—in other words, fast food properties with long-term corporate leases in place to the about 350 new net lease opportunities annually from just one user strongest chains. The reason is simple; most drug store and fast alone. Dollar General tends to look for space ranging from 7,500 food chains typically operate with longer lease terms—nearly all to 12,000 square feet and their leases tend to be 15-year deals. of the major drug store chains tend to work with 25-year deals to Family Dollar hasn’t been far behind and will close this year with as start. The same is true of most major fast food players, but there many as 500 new locations. They typically work with ten-year deals is more divergence here—particularly when one takes into account and space in the 10,000 square foot range. the differences between franchisees and corporate users as well as some differences in place between local and regional chains. If lease terms are the driving force behind investor demand (and they largely are), it is only natural that the net lease property type next on the investor food chain are automotive retail buildings. This is because so many of the national chains operate in leases of 15 years or more. One could continue to follow this logic and make the assumption that freestanding retail buildings with shorter lease terms are not in much demand. But they would be wrong. While the investor emphasis may still be security over risk, the tolerance for risk continues to increase as economic and retail fundamentals improve.
Convenience store growth has also been explosive, thanks to industry giant 7 Eleven. They also tend to be a ten-year user and their current expansion has included both convenience store/gas station facilities as well as both standalone and inline retail only stores. Regardless, the chain has been averaging roughly 300 new stores annually for the last couple of years and has plans to keep this rate of growth in 2014. By comparison, though most drug store and fast food chains remain in growth mode, the numbers of new store openings pale by comparison. While restaurant growth is white hot nationally, much of it is being driven by fast casual players who, more often than not, opt for inline space at multitenant centers. And so while we estimate that deal activity for the traditional net lease property types that we track (single tenant automotive, drug stores and fast food) will close 2013 down roughly 20% to 25% from the levels of activity that we saw last year, overall net lease investment is up. Because of the shorter lease terms in place,
Cassidy Turley Net Lease Investment Services
2
Single Tenant Net Lease Investment Overview Fall 2013 occupancy growth for most of the past six years; discounters and off-price concepts. Dollar stores certainly fall into this category, but this also includes everything from Big Lots to Costco to grocery chains like Grocery Outlet. And it should come as no surprise that chains would want to straddle both the discount and grocery fence, because the other factor impacting retailer growth is e-commerce. Which is why the strongest levels of retail expansion now are coming from food users—whether grocery or restaurants. For the net lease marketplace, the issue of grocery expansion is a curious one as nearly all of the new concepts that are growing are using smaller Again, this all comes down to availability. Investor demand remains footprints and typically using junior box strong for all net lease investment types space. The few exceptions would be and not just from private investors, who continued Superstore growth from Target have historically been thought of as the and Walmart and a few regional players. Because of the minimal primary drivers for this marketplace. Meanwhile, many local or regional chains Because of the minimal property (particularly those that are unionized) property management management requirements of net lease are struggling and consolidating. Most requirements of net lease investment, these properties have of these users have tended to be active always been attractive to buyers looking with larger footprints of 50,000 square investment, these properties for stable income streams and minimal feet or more. For big box net lease headaches. But institutional players have always been attractive to investment, this means the smaller the continue to play a huge role in driving box the much higher the tenancy pool buyers looking for stable the marketplace as well. and less risk. The reverse is also true— the bigger the box, the bigger the risk, income streams and minimal We continue to see plenty of activity but also typically the bigger the yield. from some key institutional players. headaches. But institutional Cole Net Lease was bought in October players continue to play a by American Realty Capital Properties Is Industrial the Next Hot Thing? (ARCP) for $11.2 billion in a move that huge role in driving the makes ARCP the largest institutional What is interesting is that we are seeing marketplace as well. net-lease player with a portfolio of over a retail growth surge from many of the 3,700 properties. Prior to this, both players that we are used to seeing in our had been active in picking up portfolios malls—but it is in the form of industrial over the past year. Cole had a diverse buildings. Chains like Macy’s, Nordstrom, Walmart, Williams-Sonoma mix of mostly retail net lease in its portfolio before the sale, while and others are all rushing to keep up with a changing marketplace ARCP had a strong mix of fast food and dollar stores. Meanwhile, that has been dictated by Amazon. Amazon currently has about 55 we continue to see strong growth from players like Realty Income million square feet of distribution center space in the United States. (strong with industrial and convenience stores), National Retail By 2016, they plan to have 90 million square feet. Nearly all of Properties (convenience stores), W.P. Carey (all retail) and others. this has been done via build-to-suits as these properties tend to be All of these players have helped to boost demand and keep deals extremely unique. It is not uncommon for a building that costs $40 flowing. We anticipate that while an interest rate increase in 2014 to $60 per square foot to build to feature $100 per square foot or may have some short-term impact on deal flow—particularly from more in tenant improvement upgrades for the automation systems private investors—that the pipeline from institutional players will required for e-commerce fulfillment. Meanwhile, we are increasingly only be minimally impacted. seeing retailers inking deals for industrial buildings well above the 500,000 square foot mark that can serve both as e-commerce fulfillment and local distribution centers. This trend is only going Junior Boxes Reign Supreme as Retailers Shrink Footprints and to escalate in the coming years—we anticipate that e-commerce Store Counts related industrial could account for as much as 70 million square feet of occupancy growth in the next three years. Ironically, we now see growth in the retailer world limited by two big picture factors. The first is the ongoing subpar performance The driving force has been Amazon’s push to create same day of the economy. It is getting better each year but middle class delivery capabilities, which they are going to start rolling out on a consumers are still in frugality mode. Meanwhile, while the luxury market by market basis in the next year. Retailers understand that shopper is back and luxury retailers are also back in conservative this could be a lights out game changer and are rushing to meet growth mode. That leaves us with the group that has been driving that challenge. We have yet to see a significant uptick in demand for these new asset classes are typically viewed with more risk and have cap rates that reflect that. While we are still seeing prime McDonald’s, Chick Fil-A, CVS or Walgreen’s properties (we would typically define prime for drug store or fast food properties as ideal, urban locations in relatively new construction with long-term leases in place) trading in the 5% or less cap rate range, the equivalent gold standard for dollar stores (new, rural locations in areas with limited competition and long-term leases in place) to Family Dollar or Dollar General are still usually averaging in the 7.0% range.
www.cassidyturley.com
3
Big Picture Update Continued question is whether we will see these as early as February or as late as July. Policy issues continue to hang over the economy and reduce economic output. It is unclear if we will see another political dogfight in January/February of 2014 as the issues of government funding and the debt ceiling come back to the forefront, but the possibility of another ugly, protracted debate are high. Regardless, perhaps the most telling recent economic indicator of all is that Of course, in the meantime, FedEx and UPS have continued to of personal income growth. The Census Bureau’s September 2013 arguably benefit the most from all of this and that is why they remain numbers indicated a strong 0.5% growth in personal income for the gold standard for industrial net lease investment. While overall the second month in a row. Numbers have been slightly positive industrial net lease pricing nationally has averaged in the $40 to since February of this year. Assuming this trend continues, it will $50 range, these facilities have regularly sustain the ongoing housing economy commanded up to $250 per square foot and it will also eventually translate into or more. One question hanging over the improved consumer spending totals. The key question ahead is marketplace is whether Amazon may be In other words, this is one of the final creating a massive distribution network missing pieces of economic recovery and whether continued strong not just to deliver the goods they sell if it continues, the Fed will be boosting investor demand will be on a same day basis, but whether their interest rates before inflation starts to ultimate goal might be to compete become an issue. While this may cause enough to offset the increased head-to-head with FedEx or UPS in the some short-term growing pains in the price of borrowing next year. delivery game. We wouldn’t rule anything investment world, it is ultimately great out, but we’ll believe that when we see it. news. An improved economy will also So long as the climb is not too translate into all of those other things that But what does all of this mean for the steep or too fast, we see ultimately are more important to income net lease investment world? We have streams than mere cap rates alone. Better pricing pressures to gently yet to see much in the way of activity retail sales, more secure tenancy, higher for pure e-commerce industrial space, impact the marketplace rents all will come as well. But pricing for but we expect this to happen. Nearly many net lease investments—particularly starting with the value-adds all of the action, so far, has been in the those deemed riskier—will likely flatten form of build-to-suits. Yet, users are still and properties with less stable somewhat. leasing most of this space as opposed to occupancy first. purchasing it. So far, the developers and The key question ahead is whether investors that have built these properties continued strong investor demand will have wanted to hold on to them. Terms be enough to offset the increased price vary depending on the users, but nearly of borrowing next year. We anticipate all of the deals we have tracked have been at least ten-year deals interest rates to start to climb by April. So long as the climb is not with 20-year leases not all that uncommon. The upside to these too steep or too fast, we see pricing pressures to gently impact the properties commanding top dollar is clear—a structure with a longmarketplace starting with the value-adds and properties with less term lease in place to Amazon would be viewed as bulletproof in stable occupancy first. The gold standards of net lease investment terms of credit and stability. The downside, of course, is that these (FedEx or UPS for industrial; CVS and Walgreens for drug stores; buildings are often so built out for specialty use that backfilling an McDonald’s, Chick Fil-A or In-N-Out for fast food) may not see eventual vacancy may prove to be daunting. Still, we think that we much of a difference at all. In general, however, we anticipate will eventually start to see more of these properties being brought that there will be a period of flat pricing overall—properties with to a marketplace hungry for product. While the immense size and weaker occupancy or other issues will bear the brunt of this while prices involved would rule out most private investors, there are highest-end product will likely still command top dollar. Look for plenty of institutional players that would be more than interested cap rates to remain relatively stable through the end of this year and that would pay top dollar under the right circumstances. Look and in Q1 2014. Once debt costs start to increase (we believe in for industrial net lease investment to heat up significantly in the Q2 2014), we anticipate these averages to go up slightly (again, with years ahead. a couple of key exceptions for strongest product). As for industrial smaller warehousing space for this need, but we will. The goal will be to get away from mega-distribution centers in the middle of the country (where every market may be a two to three day drive) and towards centers that can quickly get goods to the consumers. This will mean that many chains suddenly will need multiple warehousing locations near urban markets to fulfill this need.
net lease investment, look for institutional demand to climb and for e-commerce related industrial buildings to start to come into play. Looking Ahead Looking ahead to 2014, barring a completely unforeseen financial collapse, rising interest rates are pretty much a given. The only Cassidy Turley Net Lease Investment Services
4
Single Tenant Net Lease Investment Overview Fall 2013 National Drug Store Credit Rating Concept
Credit Rating
National Convenience Store Credit Rating Typical Footprint MIN SF
MAX SF
Typical Lease Term
Concept
Credit Rating
Typical Footprint MIN SF
MAX SF
Typical Lease Term
CVS
A2
12,000
18,000
25 Years
7-Eleven
AA-
2,000
3,000
10 Years
Fred's
B2
15,000
19,000
15 Years
Casey's
B1
3,000
4,500
10 Years
Rite Aid
D2
11,000
17,000
25 Years
Quiktrip
NR
4,000
50,000
10 Years
Walgreens
B1
12,000
17,000
25 Years
Sheetz
NR
5,000
7,000
10 Years
WaWa
B
3,000
4,000
10 Years
RaceTrack Petroleum
NR
5,000
6,000
10 Years
National Fast Food Credit Rating Concept
Credit Rating
Typical Footprint MIN SF
MAX SF
Typical Lease Term
Arby's
C1
2,000
3,000
20 Years
Burger King
C2
2,000
3,000
20 Years
Carl's Jr/Hardees
C2
2,000
3,000
20 Years
Checkers
NR
1,000
1,500
20 Years
Chick Fil-A
A
2,000
3,000
20 Years
Chipotle Mexican Grill
A
2,000
3,000
10 Years
Del Taco
NR
1,700
2,500
20 Years
In-N-Out
A
2,000
3,000
20 Years
Jack in the Box
C2
2,000
2,500
McDonald's
A
3,000
Panda Express
NR
Popeye's
National Automotive Retail Credit Rating Concept
Credit Rating
Typical Footprint MIN SF
MAX SF
Typical Lease Term
Advance Auto Parts
B2
6,000
8,000
15 Years
AutoZone
C1
5,000
8,000
15 Years
Bridgestone/ Firestone
NR
7,000
9,000
15 Years
CarMax
NR
20,000
40,000
20 Years
20 Years
Discount Tire Company
NR
7,000
8,000
10 Years
4,000
20 Years
Jiffy Lube
NR
1,000
2,500
10 Years
2,000
2,500
10 Years
Midas
NR
4,000
6,000
10 Years
NR
2,500
3,000
20 Years
Starbucks
A-
1,500
2,000
10 Years
National Tire & Battery
NR
4,000
9,000
20 Years
Steak N Shake
B
3,000
3,500
20 Years
B1
6,000
9,000
20 Years
Sonic Drive In
NR
1,500
2,000
20 Years
O'Reilly Auto Parts
Tim Hortons
NR
2,000
3,000
20 Years
Pep Boys
C2
5,000
10,000
15 Years
Wendy's
C1
3,000
4,000
20 Years
Tire Kingdon
NR
3,000
6,000
10 Years
2,000
3,000
20 Years
Tuffy Auto Service Center
NR
3,000
6,000
10 Years
White Castle
National Dollar Store Credit Rating Concept
Credit Rating
Typical Footprint MIN SF
MAX SF
Typical Lease Term
99 Cents Only
C2
15,000
20,000
10 Years
Dollar General
B1
9,000
12,000
15 Years
Dollar Tree
A2
8,000
15,000
10 Years
Family Dollar
B1
8,000
10,000
10 Years
www.cassidyturley.com
5
National Box Users Credit Rating Mid Boxes (40,000 SF - 79,999 SF)
National Box Users Credit Rating Junior Boxes (20,000 SF - 39,999 SF) Concept
24 Hour Fitness
Credit Rating
B
Typical Footprint MIN SF
MAX SF
15,000
25,000
Typical Lease Term
Concept
Credit Rating
Typical Footprint MIN SF
MAX SF
Typical Lease Term
10 Years
Academy Sports
C2
65,000
73,000
20 Years
Burlington Coat Factory
B-
60,000
80,000
10 Years
Alco
E1
25,000
30,000
10 Years
Aldi
NR
15,000
20,000
10 Years
Ashley Furniture
NR
30,000
40,000
10 Years
Dick's Sporting Goods
A1
50,000
80,000
10 Years
Bed Bath & Beyond
BBB+
20,000
40,000
10 Years
Giant Eagle
NR
50,000
70,000
20 Years
Best Buy
C1
30,000
40,000
10 Years
Harris Teeter
B1
30,000
60,000
20 Years
Big Lots
B2
25,000
35,000
10 Years
Hobby Lobby
A
50,000
70,000
15 Years
DSW
A2
18,000
23,000
10 Years
Kohl's
B2
65,000
90,000
20 Years
Fresh Market
A2
18,000
25,000
15 Years
Kroger
B1
50,000
75,000
20 Years
Gold's Gym
NR
10,000
45,000
10 Years
Marsh
E2
45,000
65,000
20 Years
HH Gregg
B2
25,000
45,000
15 Years
LA Fitness
NR
35,000
45,000
15 Years
Marshall's
A
30,000
35,000
10 Years
Michael's
B
15,000
25,000
10 Years
Nordstrom Rack
A-
35,000
45,000
10 Years
Office Depot/ Office Max
C2
20,000
25,000
10 Years
Orscheln Farm & House
NR
25,000
45,000
10 Years
PetSmart
BB+
12,000
20,000
10 Years
Planet Fitness
NR
18,000
27,000
10 Years
REI
B2
20,000
25,000
10 Years
Ross Dress for Less
B1
25,000
35,000
10 Years
Safeway
C1
45,000
90,000
20 Years
Sprouts Farmers Markets
B2
20,000
30,000
10 Years
Staples
B2
10,000
20,000
TJ Maxx
B1
25,000
Tractor Supply
B2
20,000
Trader Joe's
NR
15,000
Cassidy Turley Net Lease Investment Services
Piggly Wiggly
NR
25,000
65,000
20 Years
Price Chopper
NR
30,000
60,000
20 Years
Publix
A2
30,000
60,000
20 Years
Roundy's
D2
50,000
70,000
20 Years
Schnuck's
NR
45,000
55,000
20 Years
Sports Authority
B-
40,000
50,000
10 Years
Stater Brothers
D1
40,000
50,000
20 Years
Whole Foods
A1
35,000
40,000
20 Years
Winn Dixie
NR
40,000
50,000
20 Years
National Box Users Credit Rating Mega Boxes (80,000 SF or more) Concept
Credit Rating
Typical Footprint
Typical Lease Term
MIN SF
MAX SF
B
85,000
125,000
20 Years
Cabela's
A2
100,000
125,000
20 Years
Costco
B1
145,000
160,000
20 Years
Home Depot
A2
100,000
110,000
20 Years
Lifetime Fitness
NR
100,000
125,000
10 Years
Lowe's
B1
100,000
120,000
20 Years
Meijer
NR
180,000
210,000
20 Years
Menards
NR
100,000
130,000
20 Years
Sam's Club
AA
120,000
150,000
20 Years
Target
B1
85,000
150,000
20 Years
Walmart
A2
125,000
160,000
20 Years
Wegman's
BBB+
120,000
140,000
20 Years
10 Years
BJ's Wholesale Club
35,000
10 Years
27,000
15 Years
20,000
15 Years
6
Drug Store Retail Trends Top Drug Store Deals
Rite Aid New York, NY Price: $6,500,000 Cap Rate: 6.0%
• So far, we have been able to confirm 32 sales for Q3 2013. We anticipate that the final deal tally will be in the mid-40s. This compares to 43 deals in Q2 and 30 in Q1 (the year-to-date tally now stands at 105. Last year, we tracked a total of 175 deals. Our estimate is that we will close 2013 with total deal activity down from last year’s levels by about 20%. The limited availability of product remains the greatest challenge facing the marketplace. Investor demand remains extremely strong for drug store properties. • The national average price on the drug store deals we have tracked in Q3 2013 quarter was $367 per square foot. This compares to an average of $390 per square foot in Q2 and $366 per square foot exactly one year ago. These metrics, of course, only reflect what actually has sold. The general trend, however, is one of increasing pricing as economic and commercial real estate fundamentals continue to improve. The trend of rising prices will slow or flatten once we see interest rate hikes next year. • The average capitalization rate for deals that closed in Q3 2013 was 6.9%. This compares to an average of 6.8% in Q2 and a reading of 6.7% exactly one year ago. While this metric has been climbing, the primary factor behind this has been the larger number of Rite Aid locations that have been selling lately.
Walgreens North Miami, FL Price: $11,000,000 Cap Rate: 6.0%
• Typically we see CVS and Walgreen’s properties with long-term leases in place trading in the 5% to 6% range depending on other factors like quality of building, strength of location and/or market. While Rite Aid’s financial situation has improved slightly over the past year, they still have the weakest credit of the three. Most Rite Aid deals we see are trading in the 7% or higher range, with 8% being the norm in most markets. • Cap rates will likely increase by the final half of 2014 as interest rates rise, however, continued intense competition for drug store opportunities will mean less of an uptick for these properties—particularly first-tier options.
Single Tenant Drug Store Properties CVS Noblesville, IN Price: $8,465,603 Cap Rate: 6.1%
Single Tenant Drug Store Properties
Average Cap Rate & Sale Price&(PSF) Average Cap Rate Sale Trend Price (PSF) Trend 9%
$500 $450
8%
$400 $350
7%
$300 $250
6%
$200
Walgreen’s Los Angeles, CA Price: $13,600,000 Cap Rate: 5.3%
$150 5%
$100 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Cap Rate
Average Price PSF
Source: Cassidy Turley Northern California Research, Costar, Real Capital Analytics
Cassidy Turley Net Lease Investment Services www.cassidyturley.com
Source: Cassidy Turley BT Commercial Research, Costar, Real Capital Analytics
7
Single Tenant Lease Single Tenant Net Net Lease Investment Overview 2013 Investment Overview Fall Fall 2013
National Single Tenant Drug Store Market US Northeast Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
CVS
1075 Broadway Street, Saugus, MA
14,693
02/2013
$9,361,000
$637
6.9%
Walgreens
30 W Ridge Pike, Limerick, PA
14,820
05/2013
$7,000,000
$472
6.4%
Rite Aid
4900 Broadway, New York, NY
9,200
05/2013
$6,500,000
$707
6.0%
Walgreens
1093 N. Main Street, Dayville, CT
14,820
02/2013
$6,420,000
$433
6.0%
Rite Aid
869 2nd Avenue, Troy, NY
14,673
05/2013
$6,175,000
$421
8.9%
CVS
3016 Route 940, Mount Pocono, PA
13,225
09/2013
$5,100,000
$386
7.1%
CVS
1321 Allegheny Street, Jersey Shore, PA
10,125
03/2013
$3,800,000
$375
6.7%
Rite Aid
331 Main Street, Nashua, NH
15,086
02/2013
$3,262,533
$216
8.5%
Rite Aid
2501 Saw Mill Boulevard, Pittsburgh, PA
10,908
01/2013
$3,139,752
$288
10.9%
Rite Aid
78 N. Broad Street, Norwich, NY
10,908
01/2013
$2,555,000
$234
9.0%
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
National Single Tenant Drug Store Market US Southern Region Select Major Sale Transactions Property Walgreens
15050 Biscayne Boulevard, North Miami, FL
14,550
03/2013
$11,000,000
$756
6.0%
Walgreens
3188 Highway 278 NW, Covington, GA
14,820
02/2013
$8,075,000
$545
6.3%
CVS
4001 W. William Cannon Drive, Austin, TX
12,900
07/2013
$7,429,250
$576
5.2%
CVS
10000 Jefferson Davis Parkway, Fredericksburg, VA
12,900
02/2013
$6,970,000
$540
6.5%
Walgreens
231 E. Dixon Boulevard, Shelby, NC
14,820
06/2013
$6,875,100
$464
5.9%
Walgreens
3028 Clairmont Avenue, Birmingham, AL
13,076
04/2013
$6,829,270
$522
5.8%
Walgreens
2427 Springs Road NE, Hickory, NC
14,820
02/2013
$6,796,875
$459
6.4%
CVS
24795 Pinebrook Road, Chantilly, VA
12,840
08/2013
$6,700,000
$522
5.8%
CVS
1820 US Highway 1, Rockledge, FL
11,970
06/2013
$6,700,000
$560
6.0%
Rite Aid
2005 Maple Street, Rome, GA
14,673
06/2013
$5,152,100
$351
8.0%
Cassidy Turley Net Lease Investment Services www.cassidyturley.com
8
Single Tenant Net Lease Investment Overview Fall 2013
National Single Tenant Drug Store Market US Midwest Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
Walgreens
1050 Waukegan Road, Northbrook, IL
14,500
05/2013
$11,779,661
$812
5.9%
Walgreens
1145 Main Street, Antioch, IL
14,820
03/2013
$8,607,231
$581
6.7%
CVS
14575 Mundy Drive, Noblesville, IN
12,900
01/2013
$8,465,603
$656
6.1%
Walgreens
985 N. Arlington Avenue, Indianapolis, IN
14,490
04/2013
$7,517,355
$519
6.1%
Walgreens
7045 S. Pulaski Rd, Chicago, IL
12,329
09/2013
$6,000,000
$487
6.8%
Walgreens
419 E. Michigan Avenue, Ypsilanti, MI
13,650
01/2013
$5,600,000
$410
6.4%
Rite Aid
3362 Navarre Avenue, Oregon, OH
14,565
06/2013
$5,585,000
$383
8.5%
Walgreens
6320 E. Main Street, Reynoldsburg, OH
15,120
06/2013
$5,400,000
$357
7.9%
Walgreens
7864 Hamilton Avenue, Cincinnati, OH
17,110
05/2013
$5,097,744
$298
6.7%
CVS
30920 A Southfield Road, Southfield, MI
13,314
06/2013
$4,758,000
$357
5.9%
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
National Single Tenant Drug Store Market US West Region Select Major Sale Transactions Property Walgreens
1050 N. Highlands Avenue, Los Angeles, CA
13,387
05/2013
$13,600,000
$1,016
5.3%
Walgreens
718 91st Street, Lake Stevens, WA
15,361
04/2013
$9,294,605
$605
6.0%
Walgreens
9800 S. Estrella Parkway, Goodyear, AZ
14,820
06/2013
$9,094,000
$614
5.8%
Walgreens
495 E. Holt Avenue, Pomona, CA
13,680
04/2013
$8,250,000
$603
5.9%
CVS
4990 S. Arizona Avenue, Chandler, AZ
13,013
07/2013
$7,913,500
$608
6.0%
Walgreens
28516 N. El Mirage Road, Peoria, AZ
14,820
03/2013
$7,600,000
$513
6.3%
Rite Aid
39155 Washington Street, Palm Desert, CA
17,272
08/2013
$7,150,000
$414
7.3%
Walgreens
750 N. Virginia Street, Reno, NV
15,067
08/2013
$6,500,000
$431
6.0%
Rite Aid
17615 140th Ave SE, Renton, WA
16,280
07/2013
$6,645,000
$408
8.4%
Walgreens
10601 E. Alameda Avenue, Aurora, CO
14,783
10/2013
$5,833,800
$395
6.0%
Cassidy www.cassidyturley.com Turley Net Lease Investment Services
9
Single Tenant Net Lease Investment Overview Fall 2013 Fast Food Retail Trends Top Fast Food Deals
McDonald’s Melville, NY Price: $3,025,000 Cap Rate: 4.4%
• So far, we have been able to confirm 38 sales for Q3 2013. We anticipate that the final deal tally will be in the low 50s. This compares to 57 deals in Q2 and 31 in Q1 (the year-to-date tally now stands at 126. Last year, we tracked a total of 213 deals. Our estimate is that we will close 2013 with total deal activity down from last year’s levels by about 15%. The limited availability of product remains the greatest challenge facing the marketplace. Investor demand remains extremely strong for fast food properties. • The national average price on the fast food deals we tracked in Q3 2013 was $441 per square foot. This compares to an average of $455 per square foot in Q2 and $401 per square foot exactly one year ago. These metrics, of course, only reflect what actually has sold. The general trend, however, is one of increasing pricing as economic and commercial real estate fundamentals continue to improve. The trend of rising prices will slow or flatten once we see interest rate hikes next year. • The average capitalization rate for deals that closed in Q3 2013 was 6.9%. This compares to an average of 6.5% in Q2 and a reading of 7.0% exactly one year ago.
Taco Bell Pensacola, FL Price: $2,700,000 Cap Rate: 6.5%
• In general, we are seeing first-tier fast food properties moving with cap rates below the 6% mark nationally, though we have seen some top quality assets (great location in strong market) with the most desirable long-term tenancy in place (McDonald’s., Chick fil-A, In-N-Out, etc.) trade with caps heading into the 4% range. Second-tier fast food properties are averaging in the 6% - 8% rate nationally with some regional variations based upon the strength of the local marketplace. Third-tier and/or value-add fast food properties are generally trading with cap rates above the 8% mark everywhere, with triple digit caps not uncommon in weaker trade areas. • Cap rates will likely increase by the final half of 2014 as interest rates rise, however, continued intense competition for first-tier fast food opportunities will mean less of an uptick for these properties.
Single Tenant Fast Food Properties Burger King Chicago, IL Price: $2,300,000 Cap Rate: 6.5%
Single Tenant Fast Food Properties
Average Cap Rate & Sale Price&(PSF) Average Cap Rate Sale Trend Price (PSF) Trend 10%
$600 $550
9%
$500 8%
$450 $400
7%
$350
6%
$300
Carl’s Jr.
5%
Redondo Beach, CA Price: $3,200,000 Cap Rate: 4.5%
4%
$250 $200 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Cap Rate
Average Price PSF
Source: Cassidy Turley Northern California Research, Costar, Real Capital Analytics
Cassidy www.cassidyturley.com Turley Net Lease Investment Services
Source: Cassidy Turley BT Commercial Research, Costar, Real Capital Analytics 10
National Single Tenant Fast Food Market US Northeast Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
McDonald's
729 Walt Whitman Road, Melville, NY
2,317
03/2013
$3,025,000
$1,306
4.4%
Taco Bell
1050 2nd Street, Manchester, NH
3,378
02/2013
$2,297,800
$680
N/A
Burger King
133 Macy Street, Amexbury, MA
4,873
07/2013
$2,234,394
$459
N/A
Taco Bell
13609 Crayton Boulevard, Hagerstown, MD
2,675
08/2013
$1,824,795
$682
6.6%
Chipotle
3580 Horizon Boulevard, Trevose, PA
2,193
03/2013
$1,800,000
$821
5.5%
McDonald's
174 Hoosick St, Troy, NY
3,915
01/2013
$1,579,411
$403
4.1%
Five Guys Burgers & Fries
720 Loucks Rd, York, PA
2,715
04/2013
$1,385,000
$510
5.6%
Burger King
330 Pompton Avenue, Cedar Grove, NJ
2,307
05/2013
$995,000
$431
6.0%
Taco Bell
1922 Empire Boulevard, Webster, NY
2,220
06/2013
$700,000
$315
8.1%
KFC
451 Foxon Boulevard, New Haven, CT
2841
06/2013
$625,000
$220
4.6%
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
National Single Tenant Fast Food Market US Southern Region Select Major Sale Transactions Property McDonald's
1302 W. Fairbanks Avenue, Winter Park, FL
4,150
04/2013
$2,926,800
$705
4.1%
Taco Bell
305 S. New Warrington Road, Pensacola, FL
2,782
06/2013
$2,700,000
$971
6.5%
McDonald's
1473 Hudson Bridge Road, Stockbridge, GA
4,504
05/2013
$2,555,000
$567
4.5%
McDonald's
822 Highway 17 N., Little River, SC
4,623
06/2013
$2,385,000
$516
4.2%
McDonald's
9414 W. Northlake West Drive, Charlotte, NC
4,300
08/2013
$2,320,000
$540
4.5%
Bojangle's
7897 E. Brainerd Road, Chattanooga, TN
3,808
07/2013
$2,150,000
$565
7.8%
Wendy's
4849 Bill Gardner Parkway, Locust Grove, GA
3,300
02/2013
$2,020,000
$612
7.2%
Hardee's
4360 Atlanta Highway, Loganville, GA
2,726
06/2013
$2,016,000
$740
6.3%
Jack in the Box
1765 W. Mount Houston Road, Houston, TX
2,900
02/2013
$1,975,000
$681
6.5%
Wendy's
365 W. 78th Road, Hialeah, FL
3,183
07/2013
$1,845,000
$580
6.1%
Cassidy Turley Net Lease Investment Services www.cassidyturley.com
11
Single Single Tenant Tenant Net Net Lease Lease Investment Investment Overview Overview Fall Fall 2013 2013
National Single Tenant Fast Food Market US Midwest Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
Burger King
3141 S. Ashland Boulevard, Chicago, IL
2,897
07/2013
$2,300,000
$794
6.5%
Wendy's
1202 S. Jeffers Street, North Platte, NE
2,640
01/2013
$2,062,000
$781
7.9%
Culver's
501 Pingree Road, Crystal Lake, IL
4,587
01/2013
$1,990,000
$434
10.7%
Wendy's
3140 S. Rochester Road, Rochester Hills, MI
2,915
07/2013
$1,748,500
$600
8.0%
Hardee's/Green Burrito
4201 S. 11-159, Glen Carbon, IL
2,505
07/2013
$1,654,736
$661
6.3%
Burger King
1255 N. 21st Street, Newark, OH
3,500
06/2013
$1,610,000
$460
5.3%
Arby's
1501 E. Morgan Street, Kokomo, IN
3,276
04/2013
$1,494,212
$456
8.5%
Burger King
1510 N. Bridge Street, Yorkville, IL
2,500
05/2013
$1,400,000
$560
N/A
McDonald's
630 N. Route 83, Bensenville, IL
3,503
07/2013
$1,395,000
$398
5.3%
McDonald's
1617 Bartlett Avenue, Evansville, IN
3,900
02/2013
$1,200,000
$308
4.7%
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
National Single Tenant Fast Food Market US West Region Select Major Sale Transactions Property Carl's Jr.
2100 Artesia Boulevard, Redondo Beach, CA
2,739
02/2013
$3,200,000
$1,168
4.5%
Burger King
1964 N. Broadway, Santa Maria, CA
2,408
06/2013
$2,946,828
$1,224
5.1%
Carl's Jr./Green Burrito
222 N. Euclid Street, Fullerton, CA
7,348
02/2013
$2,710,000
$369
4.5%
Jack in the Box
1191 S. Mt. Vernon Avenue, Colton, CA
2,600
09/2013
$2,455,000
$944
5.5%
Burger King
6401 Balboa Avenue, San Diego, CA
4,078
04/2013
$2,330,000
$571
4.9%
Jack in the Box
770 Ramona Expressway, San Jacinto, CA
2,850
05/2013
$2,250,000
$789
5.1%
McDonald's
8556 Blue Diamond Road, Las Vegas, NV
3,736
10/2013
$2,183,908
$585
4.4%
Chipotle
1525 S. Yuma Palms Parkway, Yuma, AZ
4,200
04/2013
$2,040,000
$486
7.2%
Carl's Jr.
2211 S. Havana Street, Aurora, CO
3,024
02/2013
$1,750,000
$579
6.5%
Wendy's
1127 E. Florence Boulevard, Casa Grande, AZ
2,500
08/2013
$1,043,500
$417
5.8%
Cassidy Turley Net Lease Investment Services www.cassidyturley.com
12
Dollar Store Retail Trends Top Dollar Store Deals
Dollar General Manchester, NH Price: $1,895,000 Cap Rate: 7.4%
• This is the first report in which we are including dollar stores as one of the net lease asset classes that we track. As a triple net investment, this product really has only come into its own in the last few years thanks to aggressive expansion from dollar store chains at a time in which there has been strong demand for net lease investments but a limited supply of other single-tenant retail asset types. Some have questioned whether demand for dollar stores will be as strong once the overall economy improves to near “normal” levels. However, a number of key demographic factors (including the widening income gap) and the continued frugality of U.S. consumers would seem to ensure that dollar store retailers will remain in demand for now. • The national average price on the dollar store deals we tracked in Q3 2013 was $157 per square foot. This compares to an average of $158 per square foot in Q2 and $140 per square foot exactly one year ago. These metrics, of course, only reflect what actually has sold. The general trend, however, is one of increasing pricing as economic and commercial real estate fundamentals continue to improve. The trend of rising prices will slow or flatten once we see interest rate hikes next year. • The average capitalization rate for deals that closed in Q3 2013 was 7.7%. This compares to an average of 7.6% in Q2 and a reading of 7.4% exactly one year ago. • Due to the fact that most new dollar store leases are ten year deals, we see higher caps here typically than what we see for longer term fast food or drug store deals—despite relatively solid credit from nearly all of the major players. Generally, dollar stores are perceived as being most stable in rural or tertiary markets, though strong locations within primary or secondary markets are also in high demand from investors.
Dollar General Fort Myers, FL Price: $1,956,603 Cap Rate: 7.0%
• Cap rates will likely increase by the final half of 2014 as interest rates rise, however, continued intense competition for first-tier fast food opportunities will mean less of an uptick for these properties.
Single Tenant Dollar Store Properties Single Tenant Dollar Store Properties
Family Dollar
Average Cap Rate & Sale Price&(PSF) Average Cap Rate Sale Trend Price (PSF) Trend
New Baltimore, MI Price: $1,519,000 Cap Rate: 7.7%
9%
$200
$175
8%
$150 7% $125 6%
$100
Dollar Tree Inglewood, CA Price: $3,525,000 Cap Rate: 6.3%
5%
$75 2010
2011
Cap Rate www.cassidyturley.com
Cassidy Turley Net Lease Investment Services
2012
2013
Average Price PSF
Source: Cassidy Turley Northern California Research, Costar, Real Capital Analytics
Source: Cassidy Turley BT Commercial Research, Costar, Real Capital Analytics
13
Single Tenant Lease Single Tenant Net Net Lease Investment Overview 2013 Investment Overview Fall Fall 2013
National Single Tenant Dollar Store Market US Northeast Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
Dollar General
116 E. Center St, Manchester, CT
12,000
08/2013
$1,895,000
$158
7.4%
Dollar General
233 S. Bohemia Ave, Cecilton, MD
12,382
01/2013
$1,735,000
$140
7.4%
Dollar General
1406 N. High St, Millville, NJ
8,640
05/2013
$1,360,000
$157
8.0%
Dollar General
4402 State Route 981, Avonmore, PA
9,100
02/2013
$1,276,000
$140
7.2%
Family Dollar
4269 US Highway 11, De Kalb Junction, NY
8,000
02/2013
$1,042,700
$130
8.3%
Dollar General
557 Broad St, Waverly, NY
9,100
01/2013
$640,000
$70
8.4%
Dollar General
41 W. Main Street, Fonda, NY
6,494
08/2013
$590,000
$91
9.7%
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
National Single Tenant Dollar Store Market US Southern Region Select Major Sale Transactions Property Dollar General
3409 Dr. Martin Luther King Blvd, Fort Myers, FL
9,100
06/2013
$1,956,603
$215
7.0%
Fred's Super Dollar
5590 Barksdale Blvd, Bossier City, LA
16,799
06/2013
$1,920,000
$114
9.0%
Dollar General
2331 N. Highway 231, Panama City, FL
9,100
07/2013
$1,897,230
$208
6.5%
Family Dollar
951 Doyle Rd, Deltona, FL
9,600
05/2013
$1,700,000
$177
7.8%
Dollar General
15449 O'Neal Rd, Gulfport, MS
9,100
09/2013
$1,663,752
$183
7.0%
Dollar General
6134 Broad St, Douglasville, GA
9,100
04/2013
$1,570,000
$173
7.0%
Dollar General
13807 N. Main Street, Jacksonville, FL
9,026
04/2013
$1,546,730
$171
6.7%
Family Dollar
2711 Getwell Rd, Memphis, TN
8,320
01/2013
$1,495,954
$180
8.5%
Dollar General
9940 Route 643, Hurley, VA
12,480
05/2013
$1,482,581
$119
7.0%
Family Dollar
10747 Homestead Rd, Houston, TX
8,320
04/2013
$1,477,311
$178
8.1%
Cassidy Turley Net Lease Investment Services www.cassidyturley.com
14
Single Tenant Net Lease Investment Overview Fall 2013
National Single Tenant Dollar Store Market US Midwest Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
Family Dollar
12299 S. Pulaski St, Alsip, IL
8,222
04/2013
$1,800,000
$219
9.6%
Family Dollar
37040 Green St, New Baltimore, MI
8,000
06/2013
$1,519,000
$190
7.7%
Family Dollar
225 W. Main St, Crosby, MN
9,500
07/2013
$1,150,112
$121
8.0%
Dollar General
226 S. Somonauk Rd, Cortland, IL
8,833
01/2013
$1,120,000
$127
7.1%
Dollar General
811 E. McDevitt Avenue, Jackson, MI
9,000
08/2013
$1,106,000
$123
8.0%
Dollar General
24199 1st Ave, Siren, WI
9,026
08/2013
$1,105,000
$122
7.7%
Dollar General
1001 W. Walnut Ave, Frankfort, IN
9,014
02/2013
$962,000
$107
8.0%
Family Dollar
8154 Main St, Birch Run, MI
9,500
07/2013
$958,878
$101
8.0%
Family Dollar
1432 S. Main St, Rockford, IL
9,180
08/2013
$855,000
$93
9.6%
Dollar General
12421 Hayes Street, Detroit, MI
13,478
08/2013
$841,500
$62
8.9%
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
National Single Tenant Dollar Store Market US West Region Select Major Sale Transactions Property Dollar Tree
811 N. La Brea Ave, Inglewood, CA
12,221
05/2013
$3,525,000
$288
6.3%
Dollar General
5090 S. Maryland Pkwy, Las Vegas, NV
12,380
10/2013
$3,267,815
$264
6.0%
Dollar Tree
1895 Howe Ave, Sacramento, CA
12,928
04/2013
$2,350,000
$182
6.9%
Dollar General
1335 W. Ajo Way, Tucson, AZ
9,100
05/2013
$1,790,000
$197
6.8%
Family Dollar
5167 E. Belmont Ave, Fresno, CA
8,320
04/2013
$1,620,000
$195
6.9%
Dollar General
1742 N. Ruthrauff Rd, Tucson, AZ
9,100
06/2013
$1,587,000
$174
7.2%
Family Dollar
300 N. Village Wy, Dewey, AZ
8,320
05/2013
$1,422,000
$171
7.9%
Family Dollar
1685 E. Cottonwood St, Cottonwood, AZ
9,180
07/2013
$1,410,000
$154
8.5%
Family Dollar
4915 E. Desert Inn Rd, Las Vegas, NV
10,187
04/2013
$1,206,000
$118
7.8%
Family Dollar
347 W. Carr Ave, Cripple Creek, CO
8,050
04/2013
$1,003,000
$125
8.0%
www.cassidyturley.com
15
Single Tenant Net Lease Investment Overview Fall 2013 Single-Tenant Automotive Retail Trends Top Automotive Deals
• The average capitalization rate for deals that closed in Q3 2013 was 7.5%. This compares to an average of 7.9% in Q2 and a reading of 7.2% exactly one year ago.
Pep Boys Nashua, NH Sale Price: Cap Rate:
$4,734,756 7.6%
$3,800,000 6.8%
National Tire & Battery Countryside, IL Sale Price: Cap Rate:
• Because automotive leases tend to be shorter in length than the ones we see for drug stores or fast food—typically averaging 10 to 15-year terms, depending on the user—we see slightly higher cap rates in general for this asset class. • The gold standard for single-tenant automotive investment deals remain corporate leases to strong, national credit players like Jiffy Lube, Firestone, O’Reilly Automotive and Pep Boys. This is assuming, of course, that the location itself is a strong asset and that there is a long-term lease in place. Regardless, we continue to see strong investor demand even for properties leased by weaker credit tenants assuming other positive attributes are in place.
Firestone Baltimore, MD Sale Price: Cap Rate:
• The national average price on the automotive deals we tracked in Q3 2013 was $137 per square foot. This compares to an average of $133 per square foot in Q2 and $126 per square foot exactly one year ago. These metrics, of course, only reflect what actually has sold. The general trend has been one of pricing increases as underlying economic and retail real estate fundamentals have improved. The pace of these pricing increases, however, is likely to slow heading into 2014. Rising interest rates next year will eventually flatten pricing as the price of borrowing increases and cap rates climb.
$2,700,000 7.7%
• Cap rates will likely increase by the final half of 2014 as interest rates rise, however, continued intense competition for single-tenant automotive retail opportunities will mean less of an uptick for these properties—particularly first-tier options.
Single Tenant Automotive Properties Single Tenant Automotive Properties
Average Cap Rate & Sale Price&(PSF) Average Cap Rate Sale Trend Price (PSF) Trend 12%
$250
11% $200
10% 9%
$150
8% $100
7%
Meineke
6%
Costa Mesa, CA Price: $1,625,000 Cap Rate: 6.5%
5%
$50
4%
$0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Cap Rate
Average Price PSF
Source: Cassidy Turley Northern California Research, Costar, Real Capital Analytics
Cassidy Turley Net Lease Investment Services www.cassidyturley.com
16
Source: Cassidy Turley BT Commercial Research, Costar, Real Capital Analytics
National Single Tenant Automotive Market US Northeast Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
Pep Boys
274 Amherst Street, Nashua, NH
19,300
01/2013
$4,734,756
$245
7.6%
Pep Boys
331 Crooked Lane, King of Prussia, PA
10,000
08/2013
$1,500,000
$150
N/A
STS Tire & Auto Center
2150 Route 33, Hamilton, NJ
6,955
05/2013
$1,300,000
$187
N/A
Little Neck Auto Care Center
47 Little Neck Parkway, Little Neck, NY
3,500
04/2013
$1,200,000
$343
6.5%
Garden State Auto Medix
965 Rahway Avenue, Union, NJ
3,760
05/2013
$775,000
$206
N/A
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
National Single Tenant Automotive Market US Southern Region Select Major Sale Transactions Property Sears Auto Center
160 N. New Hope Road, Gastonia, NC
8,000
05/2013
$5,330,500
$666
N/A
Firestone
6581 Eastern Avenue, Baltimore, MD
8,500
01/2013
$3,800,000
$447
6.8%
Pep Boys
950 Hooks Street, Clermont, FL
14,360
06/2013
$3,300,000
$230
7.6%
Pep Boys
830 SE Military Dr, San Antonio, TX
22,737
04/2013
$2,635,000
$116
7.7%
Christian Brothers Automotive
22120 Highway 290, Cypress, TX
4,921
08/2013
$2,289,000
$465
7.3%
National Single Tenant Automotive Market US Midwest Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
Firestone
590 E. Roosevelt Road, Lombard, IL
8,500
04/2013
$4,178,000
$492
6.8%
National Tire & Battery
9850 Joliet Road, Countryside, IL
11,142
03/2013
$2,700,000
$242
7.7%
Tire Discounters
1544 Georgesville Road, Columbus, OH
6,000
07/2013
$1,682,500
$280
8.2%
Advanced Auto Parts
1135 E. Division Street, Diamond, IL
6,125
02/2013
$1,639,100
$268
7.1%
Tire Discounters
960 S. Shannon Street, Van Wert, OH
7,000
06/2013
$1,506,860
$215
8.0%
National Single Tenant Automotive Market US West Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
Ramona Tire
1488 E. 2nd Street, Beaumont, CA
4,990
07/2013
$2,495,000
$500
6.0%
Christian Brothers Auto
14755 E. Arapahoe Road, Aurora, CO
4,945
10/2013
$2,410,000
$487
7.0%
Jiffy Lube
4500 Clayton Street, Concord, CA
4,170
07/2013
$2,016,100
$483
6.3%
Meineke
2049 Harbor Boulevard, Costa Mesa, CA
5,431
05/2013
$1,625,000
$299
6.5%
Jiffy Lube
2517 S. El Camino Real, San Mateo, CA
4,060
06/2013
$1,580,000
$389
6.4%
Jiffy Lube
1209 N. Dysart Road, Avondale, AZ
2,134
10/2013
$1,310,000
$614
8.2%
Autozone
7659 E. Guadelupe Road, Mesa, AZ
5,399
04/2013
$850,000
$157
5.9%
Cassidy Turley Net Lease Investment Services www.cassidyturley.com
17
Single Tenant Net Lease Investment Overview Fall 2013 Top Gas Station / Convenience Store Deals
7-Eleven San Diego, CA Price: $3,700,000 Cap Rate: 5.1%
Gas Station / Convenience Store Trends • The national average price on the convenience store/gas station deals we tracked in Q3 2013 was $662 per square foot. This compares to an average of $702 per square foot in Q2 and $638 per square foot exactly one year ago. These metrics, of course, only reflect what actually has sold. There are also large disparities in pricing depending upon geography both in terms of local market pricing, but also in terms of urban versus suburban or rural pricing. It is not uncommon for deals above $1,000 per square foot in urban markets. The general trend, however, is one of increasing pricing as economic and commercial real estate fundamentals continue to improve. The trend of rising prices will slow or flatten once we see interest rate hikes next year. • Deal activity this year has been extremely strong in the southeastern United States with robust trading activity in both the Florida and Texas markets. California, Arizona and Nevada are the western markets that have seen the most trading activity so far in 2013. • The average capitalization rate for deals that closed in Q3 2013 was 5.9%. This compares to an average of 6.0% in Q2 and a reading of 6.6% exactly one year ago.
7-Eleven Sunrise, FL Price: $4,775,000 Cap Rate: 5.3%
• Cap rates for convenience store/gas stations have consistently averaged lowest for corporate owned locations, particularly for 7 Elevens and those of major chain operators, regardless of the banner they operate under. Individual franchises, on the other hand, are largely a matter of individual credit and length of remaining lease. • Cap rates will likely increase by the final half of 2014 as interest rates rise, however, continued intense competition for first-tier fast food opportunities will mean less of an uptick for these properties.
Single Tenant Gas Station/Convenience Store Single Properties Tenant Gas Station / Convenience Store Properties Average Cap Rate & Sale Price&(PSF) Average Cap Rate Sale Trend Price (PSF) Trend 10%
BP Pittsburgh, PA Price: $1,675,000 Cap Rate: 5.3%
$800
9% $700 8% $600
7% 6%
$500 5% 4%
$400 2010
2011
2012
Cap Rate
2013
Average Price PSF
Kwik Trip Baraboo, WI Price: $1,053,000 Cap Rate: 10.0%
Cassidy www.cassidyturley.com Turley Net Lease Investment Services
Source: Cassidy Turley Northern California Research, Costar, Real Capital Analytics Source: Cassidy Turley BT Commercial Research, Costar, Real Capital Analytics
18
National Single Tenant Gas Station / Convenience Store Market US Northeast Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
Mobil
2001 Barlow Ave, Bronx, NY
1,941
07/2013
$6,350,000
$3,272
N/A
Mobil
2474 Flatbush Ave, Brookkyn, NY
2,108
10/2013
$3,500,000
$1,660
N/A
7-Eleven
175 W. Sunrise Hwy, Lindenhurst, NY
2,640
06/2013
$3,000,000
$1,136
5.6%
Sheetz
809 E, Main St, Girard, PA
6,483
08/2013
$2,400,000
$370
6.0%
Mobil
1501 5th Ave, Bay Shore, NY
1,453
02/2013
$2,100,000
$1,445
N/A
Exxon
75 Route 17, Ramsey, NJ
4,102
05/2013
$2,030,293
$495
N/A
BP
2269 Noblestown Rd, Pittsburgh, PA
2,186
05/2013
$1,675,000
$766
5.3%
BP
8136 Ohio River Blvd, Pittsburgh, PA
2,660
01/2013
$1,480,000
$556
5.9%
Shell
103 Taunton Rd, Medford, NJ
1,305
01/2013
$1,025,000
$785
11.0%
Pik Qwik
138 Main St, Thomaston, ME
2,274
09/2013
$550,000
$242
12.0%
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
National Single Tenant Gas Station / Convenience Store Market US Southern Region Select Major Sale Transactions Property Quiktrip
9020 S. Tryon Rd, Charlotte, NC
4,527
03/2013
$4,799,000
$1,060
7.3%
7-Eleven
9998 Sunset Strip, Sunrise, FL
5,576
04/2013
$4,775,000
$856
5.3%
WaWa
8049 E. Colonial Dr, Oralndo, FL
5,636
06/2013
$2,844,827
$505
5.8%
Sunoco
600 S. Courtenay Pkwy, Merritt Island, FL
2,353
04/2013
$2,809,105
$1,194
7.5%
Exxon
3501 Grapevine Mills Pkwy, Grapevine, TX
4,297
07/2013
$2,713,846
$632
6.5%
7-Eleven
1701 State Highway 276, Rockwell, TX
3,000
03/2013
$2,330,000
$777
5.7%
Circle K
1801 S. Tamiani Tr, Sarasota, FL
4,121
09/2013
$2,325,000
$564
5.9%
7-Eleven
6340 Mechanicsville Tpke, Mechanicsville, VA
3,162
06/2013
$2,243,000
$709
6.0%
Exxon
1101 Annapolis Rd, Odenton, MD
2,230
05/2013
$1,570,500
$704
5.4%
BP
4592 N. Valdosta Blvd, Valdosta, GA
3,000
02/2013
$1,120,000
$373
8.8%
Cassidy Turley Net Lease Investment Services www.cassidyturley.com
19
Single Single Tenant Tenant Net Net Lease Lease Investment Investment Overview Overview Fall Fall 2013 2013
National Single Tenant Gas Station / Convenience Store Market US Midwest Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
7-Eleven
5402 E. Superior Dr, Duluth, MN
1,309
08/2013
$2,200,000
$1,681
N/A
SuperAmerica
7525 N. Brooklyn Blvd, Monneapolis, MN
5,456
05/2013
$2,144,848
$393
N/A
7-Eleven
26 W. Main St, Lexington, OH
2,700
04/2013
$2,040,000
$756
5.9%
BP
20420 Chagrin Blvd, Shaker Heights, OH
2,827
05/2013
$1,948,625
$689
N/A
BP
1201 Omniplex Dr, Cincinnati, OH
2,262
05/2013
$1,865,000
$824
N/A
Kwik Trip
602 W. Pine St, baraboo, WI
3,254
02/2013
$1,053,000
$324
10.0%
7-Eleven
11202 Midland Blvd, St. Louis, MO
2,640
09/2013
$956,760
$362
7.5%
7-Eleven
2425 S. Big Bend Blvd, St. Louis, MO
2,460
03/2013
$800,000
$325
5.8%
White Hen Pantry
210 W. Fullerton Ave, Addison, IL
2,520
02/2013
$405,000
$161
8.0%
Kum & Go
1401 Court St, Sioux City, IA
2,625
05/2013
$177,810
$68
8.4%
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
National Single Tenant Gas Station / Convenience Store Market US West Region Select Major Sale Transactions Property 7-Eleven
7807 Balboa Ave, San Diego, CA
2,200
03/2013
$3,700,000
$1,682
5.1%
7-Eleven
8925 S. Las Vegas Blvd, Las Vegas, NV
3,000
05/2013
$3,000,000
$1,000
6.8%
Shell
26721 Rancho Pkwy, Lake Forest, CA
4,000
07/2013
$2,915,000
$729
5.0%
7-Eleven
11945 Peoria St, Henderson, CO
3,000
09/2013
$2,150,000
$717
5.6%
7-Eleven
2471 S. 7200 W, Salt Lake City, UT
3,000
08/2013
$2,025,000
$675
5.7%
Arco
18025 Magnolia St, Fountain Valley, CA
1,246
03/2013
$1,850,000
$1,485
3.2%
Shell
1810 Main St, Colorado Springs, CO
3,000
06/2013
$1,730,000
$577
7.3%
7-Eleven
4500 NE St, Johns Rd, Vancouver, WA
3,889
04/2013
$1,565,000
$402
5.8%
Circle K
5685 S. Eastern Ave, Las Vegas, NV
2,358
04/2013
$1,450,000
$615
5.5%
Circle K
965 W. Baseline Rd, Tempe, AZ
2,781
02/2013
$1,107,700
$398
6.5%
Cassidy Turley Net Lease Investment Services www.cassidyturley.com
20
Single Tenant Net Lease Investment Overview Fall 2013 Big Box Retail Trends—Junior Box Properties (20,000 – 39,999 SF)
Big Box Retail Trends—Mid-Box Properties (40,000 – 79,999 SF)
• The national average price on the junior box deals we tracked in Q3 2013 was $148 per square foot. This compares to an average of $118 per square foot in Q2 and $105 per square foot exactly one year ago. These metrics, of course, only reflect what actually has sold. The general trend, however, is one of increasing pricing as economic and commercial real estate fundamentals continue to improve. The trend of rising prices will slow or flatten once we see interest rate hikes next year.
• The average price on the mid-box deals we tracked in Q3 2013 was $131 per square foot. This compares to an average of $122 per square foot during Q2 a metric of $140 per square foot exactly one year ago. The general trend has been one of pricing generally holding its own with Class A space posting increases while Class B and C properties continue to struggle with a competitive environment. Expected interest rate hikes next year will likely have a negative impact on pricing as the cost of borrowing increases.
• Junior boxes remain the strongest segment of the big box market, simply because they have the largest potential tenant pool and we continue to see aggressive expansion from key users such as smaller format grocery, off-price apparel and discounters. We expect this trend to continue as larger box users continue to shrink formats—particularly those making the transition from mid-box floorplates to more nimble junior box footprints. • Virtually all of the big box vacancy overhang leftover from the early days of the recession has been backfilled in the 20,000 to 40,000 square foot range. This is certainly the case for Class A properties, where few vacancies remain, and demand from tenants is starting to spur development once again. • The average capitalization rate for deals that closed in Q3 2013 was 7.6%. This compares to an average of 7.5% in Q2 and a reading of 7.6% exactly one year ago. • Cap rates will likely increase by the final half of 2014 as interest rates rise, however, continued intense competition for first-tier opportunities (the best locations with long-term leases in place to the strongest national credit tenants) will mean less of an uptick for these properties.
ig Box Retail Properties unior Junior Boxes (20,000 to 40,000 SF) Box Retail Properties Average & Sale Price Average Cap Rate &Cap Sale Rate Price (PSF) Trend
(PSF)
• The average capitalization rate on mid-box deals that closed during the third quarter was 7.9%. This reflects a slight increase from the average cap rate of 7.5% posted in Q2, but a decrease from the 8.1% average that was in place one year ago. This number had been decreasing thanks to the fact that the pool of distressed mid-boxes had slowly been shrinking. However, the movement has been minimal with tenant credit remaining the primary determinant. • While most of the big box vacancy overhang leftover from the early days of the recession has been backfilled in the 40,000 to 80,000 square foot range throughout the nation’s Class A shopping centers, there remain issues for Class B and C space— particularly in tertiary or rural markets. • Cap rates will likely increase by the final half of 2014 as interest rates rise, however, continued intense competition for first-tier opportunities (the best locations with longterm leases in place to the strongest national credit tenants) will mean less of an uptick for these properties.
Big Box Retail Properties Mid-Boxes to 80,000 SF) Mid-Box(40,000 Retail Properties Average & Sale Price Average Cap Rate &Cap Sale Rate Price (PSF) Trend
10%
$250
9%
$200
(PSF)
12%
$200
11%
$175
10% 8%
$150
7%
$100
6%
$50
$150
9% $125 8% $100
7%
$75
6% 5%
$0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Cap Rate
Average Price PSF
5%
$50 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Cap Rate
Average Price PSF
Source: Cassidy Turley Northern California Research, Costar, Real Capital Analytics Source: Cassidy Turley BT Commercial Research, Costar, Real Capital Analytics
www.cassidyturley.com
Source: Cassidy Turley BT Commercial Research, Costar, Real Capital Analytics
21
Big Box Retail Trends—Mega-Box Properties (80,000 SF +) • The average price on mega-box deals we tracked in Q3 2013 was $88 per square foot. This compares to last quarter’s average of $70 per square foot and a reading of $75 per square foot exactly one year ago. These metrics, of course, only reflect what actually has sold. The general trend has been one of pricing generally holding its own. Class A space has posted modest gains but Class B and C properties continue to struggle. Expected interest rate hikes next year will likely have a negative impact on pricing as the cost of borrowing increases. • Mega-box tenancy remains an issue impacting the volatility of this sector of the marketplace. At one end of the scale, we continue to see new Target and Walmart Supercenters being developed and those properties are the gold standard of mega box net lease retail. On the other hand, department stores are generally focusing on building their discount concepts or e-commerce presence and huge questions remain as to the future health of major users like Sears and JCPenney. The pool of tenants is shrinking and though we are likely to see minor improvement from some user types, the overall trend is one of shrinking mega-box usage.
• The average capitalization rate on closed mega-box deals in Q3 2013 was 7.5%. This compares to an average cap rate of 6.2% last quarter and 7.3% exactly one year ago. These averages, however, are a bit misleading and mask the substantial bifurcation that remains in the marketplace. In general, top properties with the best occupancy are moving at 7.0% cap rates or below, but nearly everything else is trading above—often significantly above—that rate. The problem is that most troubled properties are not moving at all, which is why the average numbers appear to reflect cap rate compression when that is only modestly the case for top-tier assets. • Cap rates will likely increase by the final half of 2014 as interest rates rise, however, continued intense competition for first-tier opportunities (the best locations with long-term leases in place to the strongest national credit tenants) will mean less of an uptick for these properties.
• There are some larger user types that we expect to see more active in 2014 as the housing market continues to rebound. So long as personal income levels continue the current trend of moderate increases, the housing market should continue its recovery next year despite the fact that interest rates will likely tick up slightly. This will eventually translate into more demand for housing related retail like D-I-Y stores and furniture retailers who typically operate in this size range. However, the increases in rental demand will be modest at best before 2015.
Big Box Retail Properties Mid-Boxes (40,000 to 80,000 SF) Mega Retail Properties Average Cap RateBox & Sale Price (PSF) Trend
Average Cap Rate & Sale Price (PSF)
12%
$200
11%
$175
10%
$150
9% $125 8% $100
7%
$75
6% 5%
$50 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Cap Rate
Average Price PSF
Source: Cassidy Turley BT Commercial Research, Costar, Real Capital Analytics
Cassidy Turley Net Lease Investment Services
22
Single Tenant Net Lease Investment Overview Fall 2013
National Single Tenant Big Box Retail Market US Northeast Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
Junior Boxes (20,000 - 40,000 SF) La-Z-Boy
233 Buckland Hills Dr, Manchester, CT
24,670
04/2013
$7,750,000
$314
8.3%
Crème de la Crème Learning Center
794 US Highway 202, Bridgewater, NJ
21,555
05/2013
$6,900,000
$320
8.6%
Maybrook Travel Center
125 Neelytown Rd, Montgomery, NY
37,889
07/2013
$5,750,000
$152
7.3%
Tractor Supply
2970 Route 940, Mount Pocono, PA
24,727
02/2013
$5,490,000
$222
7.1%
PetSmart
420 Home Dr, Pittsburgh, PA
26,040
05/2013
$3,458,997
$133
N/A
PetSmart/Bob's Discount Furniture
114 Commerce Wy, Woburn, MA
56,566
07/2013
$17,600,000
$311
N/A
ShopRite
709 Central Ave, Albany, NY
65,000
06/2013
$16,732,586
$257
N/A
LA Fitness
1600 E. Ridge Rd, Rochester, NY
45,000
09/2013
$10,300,000
$229
N/A
Toys R Us
2819 Kennedy Blvd, North Bergen, NJ
41,477
06/2013
$9,025,000
$218
8.0%
LA Fitness
3000 Lincoln Pl, Greensburg, PA
45,000
01/2013
$8,800,000
$196
N/A
Multiplex Cinemas
750 W. Sunrise Hwy, Valley Stream, NY
85,586
04/2013
$22,500,000
$263
N/A
BJ's Wholesale Club
5 Ward St, Revere, MA
120,224
09/2013
$16,400,000
$136
N/A
BJ's Wholesale Club
1785 Airport Rd, Allentown, PA
112,230
09/2013
$10,600,000
$94
8.1%
Costco
325 Promenade Blvd, Bridgewater, NJ
136,570
02/2013
$7,511,350
$55
N/A
Lowe's
1605 Macedon Pkwy, Macedon, NY
139,410
08/2013
$6,565,000
$47
N/A
Mid-Boxes (40,000 - 80,000 SF)
Mega-Boxes (80,000 SF +)
Top Big Box Retail Transactions
www.cassidyturley.com
LA-Z-BOY
Toys R Us
Manchester, CT Sale Price: $7,750,000 Cap Rate: 8.3%
North Bergen, NJ Sale Price: $9,025,000 Cap Rate: 8.0%
Tractor Supply
BJ’s Wholesale Club
Mount Pocono, PA Sale Price: $5,490,000 Cap Rate: 7.1%
Allentown, PA Sale Price: $10,600,000 Cap Rate: 8.1%
23
National Single Tenant Big Box Retail Market US Southern Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
Junior Boxes (20,000 - 40,000 SF) Whole Foods
12150 Biscayne Blvd, North Miami, FL
36,000
07/2013
$19,800,000
$550
N/A
Staples
2121 Biscayne Blvd, Miami, FL
20,388
05/2013
$17,375,000
$852
5.3%
The Container Store
8460 Parkwood Boulevard, Plano, TX
23,286
05/2013
$7,950,000
$341
8.2%
Ashley Furniture
1201 S. Earl Rudder Frwy, College Station, TX
35,000
06/2013
$5,900,000
$169
8.5%
Fresh Market
3285 Robinhood Dr, Winston-Salem, NC
21,028
03/2013
$4,640,000
$221
7.3%
Academy Sports
455 Norman Rd, Valdosta, GA
71,680
05/2013
$9,790,000
$137
7.5%
Gander Mountain
1523 Vann Dr, Jackson, TN
65,000
09/2013
$8,000,000
$123
8.7%
Winn Dixie
4701 Center Point Rd, Pinson, AL
58,037
01/2013
$6,305,300
$109
7.8%
Hobby Lobby
2987 Watson Blvd, Warner Robins, GA
55,000
01/2013
$5,250,000
$95
8.4%
Belk
997 Bullsboro Dr, Newnan, GA
66,412
06/2013
$4,900,000
$74
N/A
Walmart
3274 Inner Perimeter Rd, Valdosta, GA
179,958
05/2013
$15,105,000
$84
6.2%
Reasor's
446 S. Elm St, Jenks, OK
81,014
09/2013
$11,400,000
$141
8.0%
Lowe's
1836 US Highway 78 E, Oxford, AL
135,197
07/2013
$11,250,000
$83
7.8%
Lowe's
2470 Whiskey Rd, Aiken, SC
135,197
08/2013
$10,600,000
$78
7.5%
Kohl's
1301 Beaver Creek Commons Dr, Apex, NC
101360
04/2013
$7,265,000
$72
6.4%
Mid-Boxes (40,000 - 80,000 SF)
Mega-Boxes (80,000 SF +)
Top Big Box Retail Transactions
Cassidy Turley Net Lease Investment Services
Staples
Academy Sports
Miami, FL Sale Price: $17,375,000 Cap Rate: 6.3%
Valdosta, GA Sale Price: $9,790,000 Cap Rate: 7.5%
Fresh Market
Lowe’s
Winston-Salem, NC Sale Price: $4,640,000 Cap Rate: 7.3%
Aiken, SC Sale Price: $10,600,000 Cap Rate: 7.5%
24
Single Tenant Net Lease Investment Overview Fall 2013
National Single Tenant Big Box Retail Market US Midwest Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
Junior Boxes (20,000 - 40,000 SF) Tractor Supply
1801 Milwaukee Ave, Burlington, WI
22,670
02/2013
$4,180,000
$184
7.2%
Best Buy
1600 Center Rd, Avon, OH
30,814
03/2013
$3,975,000
$129
6.5%
Gander Mountain
5114 W. Holiday Dr, Peoria, IL
31,080
09/2013
$3,575,000
$115
9.3%
Fresh Market
3033 S.Halsted St, Chicago, IL
20,500
01/2013
$3,500,000
$171
N/A
OfficeMax
2950 5th Ave S, Fort Dodge, IA
23,516
05/2013
$2,995,000
$127
N/A
Bank of America
510 N. Penn Ave, Independence, KS
25,962
06/2013
$600,000
$23
6.7%
Kittle's Factory Outlet
9810 Carney Dr, Fishers, IN
62,015
07/2013
$5,300,000
$85
8.5%
Cub Foods
350 McHenry Rd, Buffalo Grove, IL
56,192
05/2013
$4,100,000
$73
N/A
Econo Foods
1000 W. Sharon Ave, Houghton, MI
49,618
08/2013
$3,300,000
$67
8.5%
Big Lots
5112 Miller Rd, Flint, MI
40,000
06/2013
$2,287,500
$57
8.8%
Pamida
174 James Robertson Dr, Gladwin, MI
42,128
04/2013
$2,000,000
$47
10.8%
Home Depot
Otswego Plaza, Plainwell, MI
96,801
05/2013
$13,389,430
$138
6.2%
Kohl's
13900 Aklrich Ave S, Burnsville, MN
102,412
01/2013
$12,830,000
$125
6.3%
Kohl's
1400 Lawson Dr, Howell, MI
88,000
03/2013
$12,441,188
$141
6.8%
BJ's Wholesale Club
6924 Frank Ave NW, North Canton, OH
108532
02/2013
$10,771,900
$99
7.9%
K-Mart
1825 N. State Route 19, Fremont, OH
172655
05/2013
$4,150,000
$24
23.8%
Mid-Boxes (40,000 - 80,000 SF)
Mega-Boxes (80,000 SF +)
Top Big Box Retail Transactions
www.cassidyturley.com
Best Buy
Big Lots
Avon, OH Sale Price: $3,975,000 Cap Rate: 6.5%
Flint, MI Sale Price: $2,287,500 Cap Rate: 8.8%
Gander Mountain
Kohl’s
Peoria, IL Sale Price: $3,575,000 Cap Rate: 9.3%
Burnsville, MN Sale Price: $12,830,000 Cap Rate: 6.3%
25
National Single Tenant Big Box Retail Market US West Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
Junior Boxes (20,000 - 40,000 SF) Office Depot
4900 25th Ave NE, Seattle, WA
29,691
07/2013
$13,744,690
$463
5.0%
Tractor Supply
1131 W. Pacheco Blvd, Los Banos, CA
21,680
03/2013
$5,500,000
$254
7.3%
Ralph's
950 N. La Brea Ave, Inglewood, CA
34,035
02/2013
$5,100,000
$150
5.4%
Big Lots
17510 N. 75th Ave, Glendale, AZ
34,827
01/2013
$5,001,500
$144
7.3%
Tractor Supply
8540 E. Eastridge Rd, Prescott Valley, AZ
22,000
08/2013
$3,807,634
$173
N/A
Whole Foods
230 Bay Pl, Oakland, CA
57,218
02/2013
$41,400,000
$724
N/A
Hobby Lobby
27200 Alicia Pkwy, Laguna Niguel, CA
77,867
09/2013
$15,100,000
$194
5.7%
Dick's Sporting Goods
1030 Green Acres Rd, Eugene, OR
60,122
03/2013
$13,725,000
$228
7.0%
Walmart Neighborhood Market
1189 E. March Ln, Stockton, CA
54,159
05/2013
$8,574,900
$158
6.0%
Room Store
555 N. Litchfield Rd, Goodyear, AZ
50,046
03/2013
$6,210,155
$124
N/A
Sam's Club
7817 Park Meadows Dr, Lone Tree, CO
129,715
09/2013
$17,617,000
$136
6.3%
Room Store
1661 S. Alma School Rd, Mesa, AZ
120,026
03/2013
$6,000,000
$50
10.4%
Fred Meyer's
10201 SE 240th St, Kent, WA
167,146
06/2013
$13,338,000
$80
N/A
Mid-Boxes (40,000 - 80,000 SF)
Mega-Boxes (80,000 SF +)
Top Big Box Retail Transactions
Cassidy Turley Net Lease Investment Services
Office Depot
Hobby Lobby
Seattle, WA Sale Price: $13,744,690 Cap Rate: 5.0%
Laguna Niguel, CA Sale Price: $15,100,000 Cap Rate: 5.7%
Ralph’s
Sam’s Club
Inglewood, CA Sale Price: $5,100,000 Cap Rate: 5.4%
Lone Tree, CO Sale Price: $17,617,000 Cap Rate: 6.3%
26
Industrial Investment Trends Industrial Investment Deals
Pearson Education Cranbury, NJ Price: $98,000,000 Cap Rate: 7.0%
• The average price on the deals we tracked in Q3 2013 was $49 per square foot. This compares to $48 per square foot in Q2 and $47 per square foot exactly one year ago. However, there can be a wide divergence of price depending upon the type of industrial space. Modern distribution space with long-term leases in place to top logistics users routinely trade well above the $100 per square foot mark in nearly every major market (we’ve tracked a couple of FedEx deals above $250 per square foot), but pricing for older commodity warehouse tends to fall well below these averages. • Pricing is on the upswing but this is being driven by modern distribution product. In many markets, older warehousing space is only now beginning to show signs of rental rate growth following years of declining and then flat rents. Fundamentals continue to recover at a rapid clip, with occupancy growth for the industrial sector far outpacing that of office or retail. However, much of this has been driven by e-commerce buildto-suits for users like Amazon. Regardless, vacancies are falling for older properties as well and rents are poised to grow. • While we anticipate the trend of rising prices to continue heading into 2014, the likelihood of increased interest rates by midyear might derail this trend. We anticipate that average metrics will slow or flatten, although modern distribution facilities will likely still post increases.
Mitsubishi Suwanee, GA Price: $38,000,000 Cap Rate: 5.8%
• We have yet to see many e-commerce related properties come to market, but these may well be the next hot commodity for investors. While these tend to be highly specialized buildings (it is not uncommon for structures that cost $40 to $60 per square foot to build to feature $100 per square foot or more in tenant improvements), they also tend to have long lease terms in place. • The average capitalization rate for deals that closed in Q3 2013 was 7.6%. This compares to an average of 7.3% in Q2 and a reading of 7.5% exactly one year ago. Cap rates will increase by the final half of 2014 as interest rates rise, however, modern distribution facilities will see less of an uptick.
Rubbermaid Kent, OH Price: $34,900,000 Cap Rate: 7.5%
Single Tenant Industrial Properties Average Cap Rate & Sale Price (PSF) Trend
FedEx San Diego, CA Price: $14,100,000 Cap Rate: 5.2%
Single Tenant Industrial Properties Average Cap Rate & Sale Price (PSF) Trend
10%
$90
9%
$75
8%
$60
7%
$45
6%
$30
5%
$15
4%
$0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Cap Rate
Average Price PSF
Source: Cassidy Turley Northern California Research, Costar, Real Capital Analytics
Cassidy Turley Net Lease Investment Services www.cassidyturley.com
27
Single Tenant Net Lease Investment Overview Fall 2013
National Single Tenant Industrial Market US Northeast Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
Pearson Education
258 Prospect Plains Rd, Cranbury, NJ
886,875
09/2013
$98,000,000
$111
7.0%
Barnes & Noble
1 Barnes & Noble Wy, Monroe Township, NJ
1,145,200
02/2013
$83,000,000
$72
7.5%
Mohawk Distribution Center
698 Route 46, Teterboro, NJ
616,992
06/2013
$81,000,000
$131
6.1%
BJ's Warehouse
309 Dulty's Ln, Burlington, NJ
633,436
07/2013
$43,250,000
$68
7.4%
Talbots
175 Kenneth Welch Dr, Lakeville, MA
555,000
05/2013
$36,743,057
$66
N/A
FedEx
456 Sullivan Ave, South Windsor, CT
224,061
01/2013
$32,200,000
$144
6.4%
Ollie's Bargain Market Distribution Center
3300 Espresso Wy, York, PA
603,000
03/2013
$31,671,000
$53
6.7%
Xpedx
261 River Rd, Clifton, NJ
230,953
02/2013
$26,811,000
$116
5.0%
Lehigh Group Distribution Center
2834 Schoeneck Rd, Macungie, PA
270,000
06/2013
$16,550,000
$61
6.5%
FedEx
550 Delancy St, Newark, NJ
52,000
07/2013
$15,000,000
$288
5.6%
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
National Single Tenant Industrial Market US Southern Region Select Major Sale Transactions Property United Natural Foods
17901 E. 40th Ave, Aurora, CO
553,757
09/2013
$46,350,000
$84
7.2%
Braun Medical
7400 Hazard Ave, Westminster, CA
258,506
04/2013
$26,700,000
$103
5.4%
FedEx
33104 25th Ave, Kettleman City, CA
84,927
06/2013
$21,466,000
$253
7.4%
Natural Selection Foods
3701 S. Avenue 3, Yuma, AZ
220,000
10/2013
$17,850,000
$81
8.0%
Watkins Sheperd Trucking
13827 Carmenita Rd, Santa Fe Springs, CA
206,030
08/2013
$15,025,000
$73
7.5%
PODS Enterprises
1650 N. Kraemer Blvd, Anaheim, CA
122,600
04/2013
$14,300,000
$117
6.5%
FedEx
1650 47th St, San Diego, CA
76,822
08/2013
$14,100,000
$184
5.2%
Internal Revenue Service
1973 Rulon White Blvd, Ogden, UT
100,000
05/2013
$12,625,000
$126
8.6%
Dimension One Spas
2611 Business Park Dr, Vista, CA
128,531
02/2013
$10,145,000
$79
10.0%
Raley's Distribution Center
3925 Seaport Boulevard, West Sacramento, CA
135,885
10/2013
$9,675,000
$71
10.2%
Cassidy Turley Net Lease Investment Services www.cassidyturley.com
28
National Single Tenant Industrial Market US Midwest Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
Quaker Oats
9101 Orly Dr, Indianapolis, IN
1,119,915
07/2013
$60,623,063
$54
N/A
Rubbermaid
212 Progress Blvd, Kent, OH
811,200
01/2013
$34,900,000
$43
7.5%
Sears Logistics Services
1600 N. Boudreau Rd, Manteno, IL
1,400,000
03/2013
$24,000,000
$17
N/A
Case New Holland Distribution Center
300 E. Pence Rd, Cameron, MO
500,000
06/2013
$23,500,000
$47
7.2%
Liz Claiborne
8741 Jacquemin Dr, West Chester, OH
601,065
08/2013
$21,000,000
$35
8.0%
Sears Logistics Services
901 Canterbury Rd, Shakopee, MN
1,100,000
09/2013
$17,000,000
$15
N/A
FedEx
4600 Poth Rd, Columbus, OH
217,627
04/2013
$16,675,000
$77
7.5%
Gannett
8751 N. Zachary Ln, Maple Grove, MN
192,924
03/2013
$14,400,000
$75
8.6%
FedEx
2900 SW Brookside Dr, Grimes, IA
186,088
03/2013
$11,400,000
$61
7.9%
Penda Corporation
2344 W. Wisconsin Dt, Portage, WI
272,000
01/2013
$9,965,789
$37
9.6%
National Single Tenant Industrial Market US West Region Select Major Sale Transactions Property
Total SF
Sale Date
Sale Price
Price PSF
Cap Rate
United Natural Foods
17901 E. 40th Ave, Aurora, CO
553,757
09/2013
$46,350,000
$84
7.2%
Braun Medical
7400 Hazard Ave, Westminster, CA
258,506
04/2013
$26,700,000
$103
5.4%
FedEx
33104 25th Ave, Kettleman City, CA
84,927
06/2013
$21,466,000
$253
7.4%
Natural Selection Foods
3701 S. Avenue 3, Yuma, AZ
220,000
10/2013
$17,850,000
$81
8.0%
Watkins Sheperd Trucking
13827 Carmenita Rd, Santa Fe Springs, CA
206,030
08/2013
$15,025,000
$73
7.5%
PODS Enterprises
1650 N. Kraemer Blvd, Anaheim, CA
122,600
04/2013
$14,300,000
$117
6.5%
FedEx
1650 47th St, San Diego, CA
76,822
08/2013
$14,100,000
$184
5.2%
Internal Revenue Service
1973 Rulon White Blvd, Ogden, UT
100,000
05/2013
$12,625,000
$126
8.6%
Dimension One Spas
2611 Business Park Dr, Vista, CA
128,531
02/2013
$10,145,000
$79
10.0%
Raley's Distribution Center
3925 Seaport Boulevard, West Sacramento, CA
135,885
10/2013
$9,675,000
$71
10.2%
Cassidy Turley Net Lease Investment Services www.cassidyturley.com
29
Single Tenant Net Lease Investment Overview Fall 2013
Our Net Lease Services team understands the complexities and dynamics of the Net Lease marketplace. Our national platform is managed by an advisory committee composed of industry leaders from across the country. Please contact any of the following advisory committee members for more information on Cassidy Turley Net Lease Investment Services. Ric Russell San Francisco 415.781.8100 Ric.Russell@cassidyturley.com
Chuck Klein San Diego 858.546.5473 cklein@cassidyturley.com
Andy Bogardus San Francisco 415.677.0421 Andy.Bogardus@ cassidyturley.com
Doug Longyear San Francisco 415.677.0458 Doug.Longyear@cassidyturley.com
Visit www.cassidyturley.com for more information on the full range of Cassidy Turley commercial real estate services. Core Services
Real Estate
Practices and Specialties
Tenant Representation Project Leasing Property Management Project & Development Services Capital Markets - Debt Placement - Investment Sales - Note Sales - Structured Finance • Corporate Services - Facilities Management - Portfolio Administration - Project Management - Strategic Consulting - Transaction Management
• • • • •
• • • • • • • • •
• • • • •
Office Industrial Retail Multi-family Land
Auction Services Distressed Assets Financial Advisory Food and Beverage Golf and Resort Properties Government Contracting Government Services Healthcare Higher Education
About Cassidy Turley Cassidy Turley is a leading commercial real estate services provider with more than 3,600 professionals in more than 60 offices nationwide. The company represents a wide range of clients—from small businesses to Fortune 500 companies, from local non-profits to major institutions. The firm completed transactions valued at $22 billion in 2011, manages 455 million square feet on behalf of institutional, corporate and private clients and supports more than 28,000 domestic corporate services locations. Cassidy Turley serves owners, investors and tenants with a full spectrum of integrated commercial real estate services—including capital markets, tenant representation, corporate services, project leasing, property management, project and development services, and research and consulting. Cassidy Turley enhances its global service delivery outside of North America through a partnership with GVA, giving clients access to commercial real estate professionals in 65 international markets. Please visit www.cassidyturley.com for more information about Cassidy Turley. www.cassidyturley.com
• • • • • • • • • •
Hospitality Law Firm Life Sciences Location Advisory and Incentives Mission Critical Net Lease Not-for-profit Private Client Supply Chain Sustainability Services
For more information regarding this report, contact: Garrick Brown Director of Research San Francisco 916.329.1558 gbrown@ctbt.com
30