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19 May 2020

Case Study: Starbucks

Category: Case Study, Net Lease Retail Tags: Net Lease Retail, Starbucks

Property Profile

Starbucks - Los Angeles, CA
Leasable Area
23,548 sq. ft.

Matthews™ represented the landlord in a brand new long-term lease in a high profile Koreatown location. The owner engaged Matthews™ to identify the highest value and best use of their property. Senior Vice President and National Director of Matthews™, Michael Pakravan, led the transaction.

Pakravan brought on colleague, David Harrington, Executive Vice President and Managing Director, to help determine the development potential of the ±30,000 SF of land from a multifamily perspective. It was determined that the owner could either build 85 units, which had an unentitled market value of $7.2 million, or the owner could spend approximately $500,000 and 24 to 30 months to entitle the project for an increased value of $9.3 million. The Matthews™ team also recognized that assuming a 4.25% cap rate, a $400,000 annual absolute NNN rent would equate to a $9.4 million valuation. Based on this analysis, Matthews™ began marketing the property as a 3,200 SF drive-thru restaurant building for lease, hoping to find a corporate restaurant tenant to sign a minimum of a 10-year lease at $400,000 annual rent.

Matthews™ received interest from multiple national tenants and were ultimately able to drive pricing through strategic negotiations with the prospective tenants, which included Chick-Fil-A, In-N-Out, and Starbucks. The Matthews™ team successfully secured a lease with Starbucks with an initial term of 15 years, an annual rent of $440,000 with 12% increases every five years. The newly leased single-tenant net-lease asset has a market value of $11 million.

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