Starbucks Commercial Single Tenant NNN Investment in West Los Angeles

I like this deal - it's a single tenant NNN Starbucks in a great area with high household incomes and lots of new condo construction nearby. Excellent west Los Angeles county location. The picture is this morning at 8:00am, the place was very active with commuters grabbing their morning grande latte.

6.5 cap rate for 18 months, then a 7.25 cap rate for the next 5 years. Corporate Starbucks signature on the lease. This is a solid asset, perfect for a 1031 tax-deferred exchange or for a direct investment giving you a 5x multiple return compared to the 1.25% in the local bank CD. Call me for details. This Starbucks NNN deal will go fast.

Single tenant NNN investments, Ecuadorian dwarfs & DaVita Dialysis Centers

What do DaVita Dialysis Centers, a tribe of diminutive people in South America and your 1031 exchange into a single tenant NNN property have in common?

Let me start with this, do you remember buying your plane ticket at your local retail center where your trusted travel agent was located? Yes, it's been a while, perhaps some 15 years since they dominated the landscape of retail spaces. Now, you don't go buy a paper ticket next to the Starbucks, you buy it on your laptop at the Starbucks.

Do you remember the more recent local Blockbuster Video store or Hollywood Video store where you walked in a few times per week to rent your VHS (ok, that's too far back, insert DVD for you youngsters). Now on-demand video and Hulu reign supreme.

Were you at the Howard Hughes Center mall last night in the Border's book store which is having a store closing sale? Why this travesty? Think Amazon, Kindle and Ipad magazine e-scriptions.

Ok Mario, what's the theme here? maybe... Technology kills things!

...and it kills things in relation to your commercial real estate investment.

One of the hot single tenant NNN property classes for sale are the dialysis centers that are popping up all over the map - think DaVita Dialysis as the Kleenex in this category. Hundreds of new DaVita centers are being built in local neighborhoods to service the needs of patients with poorly functioning kidneys typically an effect of long term diabetes disease. The investment concept around the sale of these NNN investments is that the centers will be well frequented by their base of committed customers for decades on out.

I was explaining my understanding of this to my muse Julie this morning in the car and she recalled Ecuadorian dwarfs in South America. (please hang on, there is a circular connection coming soon)

Apparently in the last few days, an article was posted about this tribe in the Andes where the genetic make up of the tribe makes cancer and diabetes virtually non-existent. So, the medical research world has invaded the little tribe to find the medical fountain of youth (or at least the fountain of anti-carcinogen) When (not if) this gene is isolated and when the drug company gets FDA approval, some of these ailments will be eliminated or reduced.

I may be overly focused on my favorite group of people - the commercial investors out there - and my concern is that there may be empty DaVita Dialysis centers on the landscape one day in the future - or at least some renegotiated leases because their business will slide.

Therefore, as a suggestion for your next real estate investment move, stay clear of over-valued NNN deals that may not be the hot investment vehicle of the near future. Instead, consider the basics of coffee, the local Burger King and my favorite - Taco Bell - as a healthy investment alternative. In my opinion, as healthy or not as we seem to be becoming, the US appetite will always crave the Whopper.

New Bank Owned Deals in San Leandro and Hayward

Coming to market soon:

Bank owned, 4,100 square foot new retail building in shell condition on major thoroughfare in San Leandro. Perfect owner user or investor building with multiple doors for various tenant spaces. Good parking with two street entrances. $649,000.

Bank owned, 10 acre parcel in the Hayward hills for 18 home subdivision new home development. Outstanding area amidst other high end home developments. Views from some of the lot locations. Call me for an update on the tentative map approval process which is underway. Price depending on an as-is purchase or after map approval.

San Jose Commercial Property for Sale - Willow Glen $699,900

Excellent owner user building in an excellent area of Willow Glen. Space has high ceilings and roll up doors. Full usable basement. Large lot with very flexible zoning area for redevelopment potential. Possible medical, dental use. Motivated seller - make an offer!

Kohl's Opening 37 stores tomorrow - Mervyn's death yields Kohl's expansion

In 2003 Kohl's - based out of Wisconsin - opened 28 stores in California. A market that any retailer would want to be in. This was made possible by the bankruptcy of KMart. Kohl's bought the leases through the bankruptcy court at a discount and in bulk. Late last year, Kohl's successfully bid on 30+ leases that Mervyn's had at that bankruptcy auction. Now, tomorrow, Kohl's is having a mass grand opening expansion of 37 stores - most in California. This is a good sign that there are still good fundamentals in retail amidst all the retail store closures recently. If you can buy a discounted lease and have decent retail sales of mass market appealing wares, you can be profitable. Kohl's further steps in to the battle with market segment leader Target - who had owned Mervyn's until 2004 when it sold to a private equity partnership. Smart move Target! And perhaps a better move for Kohl's - we shall see...

Single Tenant NNN Family Dollar Store for Sale

Just listed is a Family Dollar store in Akron, Ohio. Amazing pricing on this solid investment property. 9.0% cap rate at a $737,733 list price. Corporate leased store by a company that is doing very well in this current economy. Over 8 years left on the lease. Corporate tenant pays for taxes and insurance. The store had $1,350,000 in sales last year. $52,000 average household income in a 5 mile radius with 240,000 population in that same area. This is a wonderful investment and amazingly priced.

Now - why is it so well priced? There is a lack of 1031 exchange buyers in the market since last year. This typical single tenant net leased investment would have sold to a west coast buyer who was selling his single family rental house with $400,000 in equity. Now that same rental home has $100,000 in equity - not enough to do an exchange and with that same house rented - why sell now? The buyers went away for the low price point NNN deals - and of course that affects the chain going up to the larger shopping center investments.

This is a great opportunity for someone with cash on the sidelines or an investment property in the right location that has not lost it's equity in the last 18 months. This same Family Dollar store will sell at a 7.5 cap rate in a couple years when the market solidifies. Very good deal indeed!

Commercial Retail Tenants Poorly Represented

It's a sad fact of the commercial real estate world that small retail users of space and for that matter also small office space users don't get good representation or they get none at all. Economics play a big factor in this. If a business owner needs 1,000 square feet of retail space for a new venture and he wants to have a 2 year lease at a rate of $1.50 per month, the compensation for the work is too small for the effort. A commercial leasing agent is looking at gross commissions in the range of $1,000-$2,000. Yes, that is not small potatoes. And yet, when compared to the work of finding the space (think no MLS, lots of sign calls, hitting commercial marketing meetings), setting up appointments to show the space (few small spaces with lockboxes, setting up appointments with landlord reps), a month of lease negotiation, attorney review time, city approval (heaven forbid a conditional use permit process), touring of architects and contractors, and then dealing with huge costs of starting up a business - that may dissuade the hopeful retail operator from actually signing the lease... I could go on and on... Many leasing agents don't see the economic benefit of allocating the time and effort. The realty then tends to be budding business entrepreneurs driving themselves around and calling on signs in the areas they think they should be. Many times not considering other areas that very well may support their business model better. Then calling landlord reps directly - who of course have their fiduciary duty to their main client - the landlord. The prospective tenant then signs whatever lease proposal hits the table. It's not equitable by any means. Solutions are grim - the best would be to hire a leasing agent - not by the commissions expected on a landlord sided fee offering - on a flat fee agreement sufficient enough to warrant the work. Few bootstrap business people want to fork out that kind of fee. OK - that's my gripe for the day - based on a commercial tenant who called me yesterday finally realizing the gravity of the lease document they signed years ago.

Where to Invest?

Or what to invest in? That was a question just posed to me by a new friend of mine. Big question if you think about it. It all started off by her asking me if I liked Pinkberry frozen yogurt as we were walking through Santana Row. Then the conversation went to the competitors in that marketplace - Red Mango and others. Good or bad for an investor? They are making a volume of sales for sure. Does that make for a good real estate investment? I would say in general no. Starbucks was the industry darling for quite a few years. Everyone wanted a strip center with Starbucks as a tenant. And those single tenant Starbucks and strip centers sold at a premium (lower) cap rate. Now, with Starbucks closing locations, this darling is no longer courted. And owners of these will not be able to sell at the same premium cap rates that they bought. Starbucks was a trend - it didn't seem so at the time - it seemed as if the world economy had shifted to have an endless demand for coffee. Pinkberry is also a trend and trends wane. I'm boring and conservative when it comes to real estate investments - I like unhealthy hamburger and boring drug stores over flash in the pan froyo and grande lattes. And then there is the thing about location...

San Jose NNN Dollar Tree for Sale

There is a great local NNN investment that just came available. On Story Road at McLaughlin in the heart of very dense retail development and renovation is a single tenant Dollar Tree on a new 10 year NNN lease. Offered at a reasonable 6% cap rate, the asking price is $5,128,000. The future upside is the 39,200 sq ft lot that the building is sitting on. The building was built in 1998 and has 4.59 spaces per 1,000 square feet or 55 parking spaces. If Dollar Tree does not exercise it's option to extend the lease in 10 years, the property will be well positioned to rent to another user. This is the time to get in to the San Jose retail market with a great location and great solid tenant. Call me for info!

Mervyn's Bankruptcy Leases Purchased by Kohl's & Forever 21

Good locations trump bad economic times.

I'm leading with the moral of the story. I know that is bass ackward. Although this market is somewhat that way too. So, it makes sense!

Have you seen a Forever 21 store? I have, they do not look like a company that would set up shop in a 80,000 square foot space recently occupied by Mervyn's. Maybe they will take a front corner section and install ice skating or a BMX park in the other 70,000 square feet. Now to be news worthy, F21 expects to widen their product line offerings and step up to a big box presence. I am NOT going to that new store with my daughter anytime soon.

Kohl's I understand. They were head to head competitors with Mervyn's. Although, may I ask, where was Target in this bidding?

The bankruptcy auction of these spaces yielded interesting results. F21 bid on some 70 Mervyn's locations. They walked away with 15. Other bidders were real estate investors. They undoubtedly won some spaces. Which probably will then be offered to the Kohl's and Forever 21 companies.

The auctions were oversubscribed because there was good value in the under- market leases that Mervyn's controlled. As in a previous posting, some of these spaces were at $.20 per foot! Bankruptcies gives us a good vantage point on real estate. Kmart went through the same process years ago. Some sites were swooped up (as in Kohl's first entry into the Bay Area) and other sites sit vacant in the middle of long stretches of highway from here to nowhere. Yes, that is why I like in-fill locations in strong metros. (Hmmm....is that the moral of the story?)

Mervyn's Bankruptcy Leases for Sale

One of Mervyn's greatest assets is the leaseholds it has in prime retail locations in Arizona, California, Nevada, Utah, New Mexico and Texas. These leases have value because most of them are significantly under market and some are held for decades into the future. The fast approaching bid deadline is currently scheduled for December 5, 2008. For sale are 154 leases in the 6 states. A couple Bay Area leases are highlighted below:

375 N. Capitol, San Jose, 70,000 sqft, through 2020, rent $9.85 per year

749 E. Calaveras Blvd, Milpitas, 75,000 sqft, through 2041, rent $18.51 per year

1500 Del Monte Center, Monterey, 81,000 sqft, through 2040, rent $1.22 per year

950 W. Hamilton Ave, Campbell, 75,000 sqft, through 2019, rent $2.21 per year

350 Showers Drive, Mountain View, 64,000 sqft, through 2010, rent $2.55 per year

2675 Geary Blvd, San Francisco, 90,000 sqft, through 2047, rent $24.95 per year

880 Mowry Ave, Newark, 82,000 sqft, through 2049, rent $12.23 per year

Yes those rents are very low - take the Monterey building for example, they are paying approximately TEN CENTS per foot per month and they have control of the building for another 32 years!

If you want to make an offer on any of these. Give me a call ASAP.

Commercial Owner User Properties Now Available

It has been forever since there has been any real inventory of commercial property available for sale in the Bay Area. Now, if you are a dentist, doctor with a retail practice, retailer, or any other professional with a healthy business, you can finally acquire your own building. There are a good number of commercial single tenant and multi tenant strips for sale. These properties are even on major corridors such as Stevens Creek and El Camino! This downturn in the market is when you can make great strides against the competition and solidify your retail presence for the future.

Foot Spas in Cupertino or the Changing Face of Commercial Property

Had I not traveled to China in late 2005 with the CCIM Institute to look at commercial and residential investment property, I would not have the perspective that hit me last night. After a late appointment, two of my coworkers came to my office and proposed a pho (Vietnamese noodle) run. Sure, at 9pm, that always hits the spot...well maybe for some. So, down the street on De Anza Blvd, we went. After the huge bowl of broth and unknown meat pieces, someone suggested a foot massage. None of us thought the others would massage feet as well as the professionals (two competing locations) who just opened up in Cupertino in the last year. So five minutes to closing time at 10pm, we plopped down in the massage chairs. The experience was wonderful and cheap - don't pass this along or the prices will start to go up - think gas prices. $20 + tip for an hour and the massage was head to toe. All in an open room with twenty or so other customers. Very above board and professional. Now - what does this have to do with real estate???
Foot massage is rampant in China. Huge facilities are packed with customers. Would the mom and pop strip center owner in the South Bay have expected that a foot massage place be a viable tenant - let alone a reputable one? Other new tenants that are popping up: badminton facilities in warehouses, Pinkberry (sure it's from LA - but if you don't pay attention to trends...), which is usurping Tapioca Express pearl milk tea shops, Tofu Houses (this is lost on me as to how MANY are needed although I won't argue their popularity), and yes, the pho noodle shops (some even numbered because there are so many) - can I say "melting pot" without getting too much grief?
So, the moral of the story is: things change all the time, reading and traveling will keep you ahead of the curve, there are many who could have given guidance to all these trends - and all this is about real estate my dear people - not just 9pm cravings for broth and tired feet..:-)
And finally a shout out to the next unique tenants to open at the venerable Santana Row: Kara's Cupcakes & Boutique Harajuku - the first very yummy and the 2nd - suitable clothes for my daughter - maybe...

Premier Restaurant Lease Location Castro Street Mountain View

A new, old space just came available in the heart of Castro Street for a top flight restaurant to occupy. It is a 5,250 square foot single story space 1/2 block from the train station, next to Vaso Azuro, Xanh and across from the Hong Kong Bistro. Offered at approximately $4 per foot, this location will be wonderful for any great foodie hangout. Call for more details or to arrange a tour.

Peninsula Investment Forum Tomorrow

John Rayden of West Valley Properties will be speaking tomorrow about the state of shopping centers and retail investments. His company manages over $200 million in equity over 22 properties of which 85% is neighborhood retail centers. He will also discuss the changes in financing and cap rates in this fluctuating economy.
April 22, 2008
First American Title
555 Marshall Street
Redwood City, CA

7:45am networking
8:15am speaker begins

Good Commercial Deals in California

I wish there were some! Well, that's not exactly a fair answer. Let me explain, break down the question and dissect. If you are an apartment building owner in Silicon Valley - rents are up, vacancies are down and you are very happy AND unmotivated to sell. If you own a strip shopping center in the Silicon Valley - same thing. Those are the two product types that I deal with most often. Less robust, yet still strong is the retail strip market throughout the rest of the state. Apartments though - quite a different story. If you have units in the Central Valley - it's getting very ugly out there. Think of your competition. A slew of single family homes, most only a few years old, that are vacant and looking for tenants. Why would a prospective tenant move into a 30 year old walk-up building in Fresno, when they can have their choice of a mini-mansion down the street? I have to ask though - is this the "good deal" you want - buying an apartment building in the central valley? I think that market is way too soft to consider at this point. Let's look next year and re-assess. There are good deals out there though - let's talk so I can show you what, where and when.

Very low price point for a NNN investment in the Greater Bay Area

This offering consists of an office building, two service bays and a parking area for the La Mesa RV Center, a regional chain of RV dealerships. Founded in 1972, La Mesa RV Center, Inc. has grown from it's original La Mesa, CA site to nine locations in California, Nevada, Arizona, Florida and Georgia. La mesa RV is a full service dealership,offering sales, financing, service and repairs.

This is a strong tenant in a booming market. Well worth a look.

Cap Rate: 6.25%
Lease space included: 1,309 sf office, Service Bays, 110 Parking Spaces
Land included: 1.15 acres
$81,000 of net operating income to the new buyer.
Offered at $1,296,000

Call to tour this great investment.

100% leased high growth center in booming Roseville

New NNN Retail Shopping Center in High-Growth Market of Roseville, CA
Excellent Location Near Housing and Businesses
Average In-Place Rents Below Market Asking Rates
Annual Rental Increases and 100% CAM Reimbursements in All Leases
To Be Delivered Free and Clear of Debt

This offering includes a 100% leased four-tenant retail building within Arbor View Village, located at the southeast corner of Pleasant Grove Blvd and Foothills Blvd in the upscale market of Roseville. The average rents at the offering are just over $2.65/sf, putting it at or below market for West Roseville creating stability and income. Arbor View Village is located in a market with growing rents,a growing population and a steady demand for retail space.

This is a true 6.5 Cap Rate deal with the ability for new financing. Excellent 1031 exchange property. Offered at $3,150,000. Call us for a marketing package.

Tulare Strip Mall

We are tracking a retail strip mall in Tulare that is a solid investment offered at $3,000,000. The center is occupied by several national tenants, as well as being shadow anchored by McDonald's and Chevron. The center is just a few years old and almost fully occupied. If interested, please call right away as there will be good activity on this property.