Triple net real estate is highly beneficial to investors who desire a relatively low-risk investment (with little to no involvement as a landlord) that provides solid, predictable returns over the long term.
NNN locations tied to established brands like Starbucks are especially coveted in net lease real estate because they typically come with a recognizable brand, premium locations, and the potential for growing returns as the property owner. It also helps that its customers are practically addicted to the product, paying $6 or more for a large cappuccino as they rush off to work in the morning or a pick-me-up while on a long drive on the interstate.
If you’re interested in a Starbucks for sale (NNN), here are six important points you should consider.
Location, Location, Location
As with any real estate property, location is a key factor in NNN properties for sale. Both the geographical and the physical placing of the NNN property will help determine the success and longevity of the store, as well as what you invest in the building that a tenant will use to run their enterprise.
Hyper-growth areas that are experiencing a higher than usual influx in population and economic growth are ideal locations to investigate for NNN lease property opportunities. If people are moving to an area, causing it to grow quickly, the local economy will typically experience a significant lift.
Additionally, a storefront that can offer drive thru coffee is more likely to draw in customers, simply because of the convenience factor.
Even though triple net lease investments are low touch from an investing standpoint, you should consider the longevity of the business operating in the spot you’re considering. You should select a business that has permanence and is not prone to shifts in technology or the economy. In short, you want a place housing a business that sells things people will always need. Some examples of desirable net lease real estate properties with longevity include:
- Convenience Stores
- Dollar Stores
- Gas Stations
- Fast Food Locations
- Grocery Stores
- Medical Facilities
License vs. Franchise
A Starbucks NNN for sale in a booming, thriving city and economy is a great investing opportunity with a recognizable coffee brand and a strong following of loyal customers. Starbucks and Starbucks coffee is known for choosing high-traffic locations such as airports, shopping malls, and prominent downtown corners with high foot traffic. Most of these businesses are owned by the corporation. Starbucks CEO Howard Schultz stated that he believed for the customer to have the best experience, the chain must have company-owned stores, i.e., not franchises, and then provide stock options to every employee to give them a financial and psychological stake in the company. Instead of a more traditional franchise agreement, many Starbucks stores operate under a license from the parent company. Experts say that it takes an initial investment of $315,000 to license a Starbucks store. Starbucks coffee has one of the most popular and recognized brands in the coffee industry, with about 33,000 stores worldwide (15,000 in the United States), and about 4,400 of them are licensed shops. The company plans to open an additional 12,000 stores globally by the end of this year.
Each Starbucks store is a profitable one with significant cash flow. According to Starbucks tax fillings, the reported profit is about $108,000 per store annually, but their profit margin may actually be much higher. Depending on where it’s located, a Starbucks store can rake in $650,000 – $750,000 total revenue a year, according to estimates.
Starbucks stores typically function with 10-year net leases (varies between NN and NNN) with an increase in rent every five years. U.S. Starbucks locations are in urban and suburban locations, and their stores take advantage of other traffic generators, usually placing them on the commuting side of traffic patterns. The average Starbucks store size can differ significantly, whether it is in an urban or suburban place, but the newer free-standing locations range from 1,500 – 2,000 square feet set on 0.50 – 1.00 acres of land. The latest store models offer a drive-thru window, and the structure can be adapted to various alternative uses. The option to purchase a retail store with a drive thru increases the value of the property significantly.
As a result, the well-known strong brand, impressive financials, and desirable locations make Starbucks an appealing option for net lease investors. Because of Starbucks’ sought-after qualities, you can expect to pay premium rates and face competition and offers from other like-minded investors.
Proximal Businesses and Traffic
An important part of a triple net property’s placing is the surrounding businesses and how accessible the site is for patrons. You should look for net lease properties in areas with good traffic and close proximity to established businesses that will help draw in customers to your business as well. Corner locations are the most desirable as they are easily accessible and add a bit of prominence to your establishment.
NNN Lease Terms and Rent
In a triple net lease, the tenant will be responsible for a vast majority of the operational expenses of a building, such as taxes, insurance, and maintenance. However, every NNN lease deal is as unique as the property itself, and terms can vary considerably from one property to another.
Each lease is specific to the terms that have been negotiated between the parties, so it’s crucial to know those terms beforehand. Otherwise, you may experience reduced profits due to unexpected costs, which you don’t even know that they are your obligations.
For example, some deals may require that you take out specific net lease insurance policies and cover those premiums, or it may be outlined that the property owner is responsible for maintenance on certain parts of the building, such as the structure and roof. Knowing ahead of time what financial responsibilities you have as the property owner will help you determine the profitability and cash flow of your investment and keep surprises from cutting into your investment down the line.
Securing A Starbucks for Sale
Sands Investment Group is knowledgeable in all types of triple net leases (including highly sought-after locations like Starbucks). We are the fastest-growing net lease investment company in America, with over 3,000 transactions in 48 states (worth $5.9 billion) since 2010, and we have the expertise to advise you on all the key factors you should be considering in your NNN investments.
SIG has extensive experience handling Starbucks NNN transactions in several different states. Recently SIG lead broker Rahill Lakhani completed a Starbucks transaction in less than two months and sold it above the asking price. The Canton, GA, store was owned by a private owner and sold for $2.025 million with a CAP of 6.40%. In addition, SIG broker Doug Roland overcame challenges and met client goals to complete the sale of a Starbucks store in Goose Creek (Charleston), SC. The client type was a developer referral. The price was $1.9 million with a closing CAP of 5.15%.
Want to learn more about Starbucks NNN for sale and speak with an industry expert about your next investment? Contact an expert today by calling 844.4.SIG.NNN or sending us an email at info@SIGnnn.com.