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June 19, 2024
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Two-Tenant Retail Building in Merced Fetches Over $700/sf


A 3.7k sf, two-tenant, net-leased retail building in Merced sold for $2.645 mil ($715/sf). The property, occupied by a Starbucks with a drive-thru and T-Mobile, is located at 360 W. 16th St. The transaction came in at a record-low cap rate for a two-tenant retail property in Central California of 5.06%.

Built in 2016, the pad building sits on .61 acres and features a 1.9k sf Starbucks with drive-thru and a 1.8k sf T-Mobile store. The property is located at a high-traffic intersection at the corner of Martin Luther King Jr. Way and 16th Street with 45,000 cars per day and is less than 1/4 miles away from Highway 99 with 52,000 cars per day.

Nearby national and regional tenants include Costco, The Home Depot, Dollar General Market, Smart & Final Extra!, Regal Cinemas, Dickey’s Barbecue Pit, Family Dollar, In-N-Out, Little Caesars, Subway, Taco Bell and Wendy’s.

The retail pad building is located within three miles from Merced College (15,400 students) and seven miles from University of California, Merced (10,000 students), which was the first research university built in the U.S.

Bill Asher, Jeff Lefko and William Ito with Hanley Investment Group Real Estate Advisors represented the seller, a private investor based in Bakersfield. The all-cash, 1031 exchange buyer, Ares Commercial Properties Inc of Novato, was repped by Mort Rothman at Starboard Commercial Real Estate in San Francisco.

“Starbucks relocated from an existing street-front location one block to the north that opened for business in 1999 that did not have a drive-thru,” said Asher. “The new location with a drive-thru draws from an established 19-year customer base in the trade area.”

Asher said, “Approximately 60% to 70% of all business for quick-service restaurants comes through the drive-thru with average Starbucks store sales approximately 50% greater in locations that have a drive-thru. Starbucks continues to seek new stand-alone drive-thru locations within a one-mile radius of older non-drive-thru stores in their continued efforts to take advantage of the increased business generated via the drive-thru.”

According to Asher, “Starbucks has become one of the most prominent and innovative retailers in today’s market. As a net-leased passive investment, Starbucks provides investors with a high level of confidence and security that requires little to no maintenance. Further, the stores are situated in high-traffic locations with strong demographics. In fiscal 2018, Starbucks experienced double-digit growth in topline revenue of $24.7 billion, up 10% over the prior year.”

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