November Capital / August 2, 2024
NNN Lease Starbucks sells in Avondale, Arizona for $2.53M or a 5.35% Cap Rate
August 1, 2024
A NNN lease Starbucks property sold in Avondale, Arizona for $2,530,000 according to CoStar. The asset had 9 years of term remaining and will yield the buyer a 5.35% cap rate.
10655 W Indian School Road, Avondale, AZ
Credit
Starbucks carries an investment grade BBB+ credit rating. This presents a NNN investor – most likely in a 1031 exchange – with a secure income stream for the remainder of the primary lease term. I would categorize Starbucks corporate credit and ability to pay rent for the next 9 years as ironclad.
Lease Structure
Starbucks leases are generally NN (double net.) This means the landlord is responsible for roof and structural repairs. This is different than an absolute NNN lease in which the landlord has zero responsibility towards maintenance. This Starbucks location was a former KFC and remodeled in 2024. The roof and building are both probably in pretty good shape. The lease carries 7.5% escalations every 5 years – which most would consider – modest increases.
Location
This Starbucks NNN asset is located off of Indian School Road which features 34,000 vehicles per day. Anchored by a Fry’s center – this Starbucks should expect to see plenty of customers. Placer.AI ranks this in the top third of Starbucks locations and this particular renovation features the first double drive thru lane for Starbucks in Arizona. With 300,000 people living within 5 miles of the site – there will be plenty of coffee drinkers supporting this location.
Deal Story
This Starbucks is well located. The Phoenix MSA is a popular destination for 1031 exchange money. This investor gets investment grade credit, high population, high traffic, solid lease term and a drive thru asset. My concern for the buyer is with the double net lease and less than 10 years of lease term. If the buyer is new to real estate, I would not recommend a double net lease. However – for an experienced investor, fixing a roof or parking lot is generally not problematic. NNN lease Starbucks continue to be super popular investment vehicles for 1031 exchange investors.
