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P R E S E N T E D B YTimothy SpeckBrokerDallas OfficeTel: (972) 755-5200Fax: (972) [email protected]: TX 432723
Offering Memorandum
SONICSONIC422 S Zarzamora St • San Antonio, TX 78207422 S Zarzamora St • San Antonio, TX 78207
N O N - E N D O R S E M E N T A N D D I S C L A I M E R N O T I C E
Confidentiality and DisclaimerThe information contained in the following Marketing Brochure is proprietary and strictly confidential. It is intended to be reviewed only by the party receiving it from Marcus & Millichap and should not be made available to any other person or entity without the written consent of Marcus & Millichap. This Marketing Brochure has been prepared to provide summary, unverified information to prospective purchasers, and to establish only a preliminary level of interest in the subject property. The information contained herein is not a substitute for a thorough due diligence investigation. Marcus & Millichap has not made any investigation, and makes no warranty or representation, with respect to the income or expenses for the subject property, the future projected financial performance of the property, the size and square footage of the property and improvements, the presence or absence of contaminating substances, PCB's or asbestos, the compliance with State and Federal regulations, the physical condition of the improvements thereon, or the financial condition or business prospects of any tenant, or any tenant's plans or intentions to continue its occupancy of the subject property. The information contained in this Marketing Brochure has been obtained from sources we believe to be reliable; however, Marcus & Millichap has not verified, and will not verify, any of the information contained herein, nor has Marcus & Millichap conducted any investigation regarding these matters and makes no warranty or representation whatsoever regarding the accuracy or completeness of the information provided. All potential buyers must take appropriate measures to verify all of the information set forth herein. Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2017 Marcus & Millichap. All rights reserved.
Non-Endorsement NoticeMarcus & Millichap is not affiliated with, sponsored by, or endorsed by any commercial tenant or lessee identified in this marketing package. The presence of any corporation's logo or name is not intended to indicate or imply affiliation with, or sponsorship or endorsement by, said corporation of Marcus & Millichap, its affiliates or subsidiaries, or any agent, product, service, or commercial listing of Marcus & Millichap, and is solely included for the purpose of providing tenant lessee information about this listing to prospective customers.
ALL PROPERTY SHOWINGS ARE BY APPOINTMENT ONLY.PLEASE CONSULT YOUR MARCUS & MILLICHAP AGENT FOR MORE DETAILS.
SONICSan Antonio, TXACT ID Y0380768
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N E T L E A S E D D I S C L A I M E R
Marcus & Millichap hereby advises all prospective purchasers of Net Leased property as follows:
The information contained in this Marketing Brochure has been obtained from sources we believe to be reliable. However, Marcus & Millichap has not and will not verify any of this information, nor has Marcus & Millichap conducted any investigation regarding these matters. Marcus & Millichap makes no guarantee, warranty or representation whatsoever about the accuracy or completeness of any information provided.
As the Buyer of a net leased property, it is the Buyer’s responsibility to independently confirm the accuracy and completeness of all material information before completing any purchase. This Marketing Brochure is not a substitute for your thorough due diligence investigation of this investment opportunity. Marcus & Millichap expressly denies any obligation to conduct a due diligence examination of this Property for Buyer.
Any projections, opinions, assumptions or estimates used in this Marketing Brochure are for example only and do not represent the current or future performance of this property. The value of a net leased property to you depends on factors that should be evaluated by you and your tax, financial and legal advisors.
Buyer and Buyer’s tax, financial, legal, and construction advisors should conduct a careful, independent investigation of any net leased property to determine to your satisfaction with the suitability of the property for your needs.
Like all real estate investments, this investment carries significant risks. Buyer and Buyer’s legal and financial advisors must request and carefully review all legal and financial documents related to the property and tenant. While the tenant’s past performance at this or other locations is an important consideration, it is not a guarantee of future success. Similarly, the lease rate for some properties, including newly-constructed facilities or newly-acquired locations, may be set based on a tenant’s projected sales with little or no record of actual performance, or comparable rents for the area. Returns are not guaranteed; the tenant and any guarantors may fail to pay the lease rent or property taxes, or may fail to comply with other material terms of the lease; cash flow may be interrupted in part or in whole due to market, economic, environmental or other conditions. Regardless of tenant history and lease guarantees, Buyer is responsible for conducting his/her own investigation of all matters affecting the intrinsic value of the property and the value of any long-term lease, including the likelihood of locating a replacement tenant if the current tenant should default or abandon the property, and the lease terms that Buyer may be able to negotiate with a potential replacement tenant considering the location of the property, and Buyer’s legal ability to make alternate use of the property.
By accepting this Marketing Brochure you agree to release Marcus & Millichap Real Estate Investment Services and hold it harmless from any kind of claim, cost, expense, or liability arising out of your investigation and/or purchase of this net leased property.
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INFORMATION ABOUT BROKERAGE SERVICESTexas law requires all real estate license holders to give the following information about brokerage services to prospective buyers, tenants, sellers and landlords.
TYPES OF REAL ESTATE LICENSE HOLDERS:• A BROKER is responsible for all brokerage activities, including acts performed by sales agents sponsored by the broker.• A SALES AGENT must be sponsored by a broker and works with clients on behalf of the broker.
A BROKER’S MINIMUM DUTIES REQUIRED BY LAW (A client is the person or party that the broker represents):• Put the interests of the client above all others, including the broker’s own interests;• Inform the client of any material information about the property or transaction received by the broker;• Answer the client’s questions and present any o�er to or counter-offer from the client; and• Treat all parties to a real estate transaction honestly and fairly.
A LICENSE HOLDER CAN REPRESENT A PARTY IN A REAL ESTATE TRANSACTION:
AS AGENT FOR OWNER (SELLER/LANDLORD): The broker becomes the property owner's agent through an agreement with the owner, usually in a written listing to sell or property management agreement. An owner's agent must perform the broker’s minimum duties above and must inform the owner of any material information about the property or transaction known by the agent, including information disclosed to the agent or subagent by the buyer or buyer’s agent.
AS AGENT FOR BUYER/TENANT: The broker becomes the buyer/tenant's agent by agreeing to represent the buyer, usually through a written representation agreement. A buyer's agent must perform the broker’s minimum duties above and must inform the buyer of any material information about the property or transaction known by the agent, including information disclosed to the agent by the seller or seller’s agent.
AS AGENT FOR BOTH - INTERMEDIARY: To act as an intermediary between the parties the broker must first obtain the written agreement of each party to the transaction. The written agreement must state who will pay the broker and, in conspicuous bold or underlined print, set forth the broker's obligations as an intermediary. A broker who acts as an intermediary:
• Must treat all parties to the transaction impartially and fairly;• May, with the parties' written consent, appoint a different license holder associated with the broker to each party (owner and buyer) to communicate with, provide opinions and advice to,
and carry out the instructions of each party to the transaction.• Must not, unless specifically authorized in writing to do so by the party, disclose:
§ that the owner will accept a price less than the written asking price;§ that the buyer/tenant will pay a price greater than the price submitted in a written offer; and§ any confidential information or any other information that a party specifically instructs the broker in writing not to disclose, unless required to do so by law.
AS SUBAGENT: A license holder acts as a subagent when aiding a buyer in a transaction without an agreement to represent the buyer. A subagent can assist the buyer but does not represent the buyer and must place the interests of the owner first.
TO AVOID DISPUTES, ALL AGREEMENTS BETWEEN YOU AND A BROKER SHOULD BE IN WRITING AND CLEARLY ESTABLISH:• The broker’s duties and responsibilities to you, and your obligations under the representation agreement. • Who will pay the broker for services provided to you, when payment will be made and how the payment will be calculated.
LICENSE HOLDER CONTACT INFORMATION: This notice is being provided for information purposes. It does not create an obligation for you to use the broker’s services. Please acknowledge receipt of this notice below and retain a copy for your records.
Information available at www.trec.texas.govRegulated by the Texas Real Estate CommissionIABS 1-0
11-2-2015
Licensed Broker /Broker Firm Name or Primary Assumed Business Name License No. Email Phone
Designated Broker of Firm License No. Email Phone
Licensed Supervisor of Sales Agent/Associate License No. Email Phone
Sales Agent/Associate’s Name License No. Email Phone
Buyer/Tenant/Seller/Landlord Initials Date4
OFFERING SUMMARY
Price $975,000
Net Operating Income $60,000
Capitalization Rate – Current 6.15%
Price / SF $731.98
Rent / SF $45.05
Lease Type NNN
Gross Leasable Area 1,332 SF
Year Built / Renovated 1997
Lot Size 0.55 acre(s)
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EXECUTIVE SUMMARY
OFFERING SUMMARY
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FINANCING
Down Payment All Cash
Net Cash Flow 6.15% / $60,000
Cash on Cash Return 6.15%
SONIC
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SONIC
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OFFERING SUMMARY
MAJOR EMPLOYERS
EMPLOYER # OF EMPLOYEES *
Air Education Training Command 10,733
Hvhc Inc 6,350
Bear County Hospital District 6,000
Baptist Health System 2,317
AT&T Corp 2,233
Boeing 2,200
Fite Distribution Svcs Co LP 2,120
Santa Rosa Childrens Hospital 2,061
P B X 2,000
Frost Bank 1,959
AT&T Services Inc 1,596
County of Bexar 1,590
DEMOGRAPHICS
1-Miles 3-Miles 5-Miles
2016 Estimate Pop 27,116 173,991 399,620
2016 Census Pop 25,222 161,900 371,772
2016 Estimate HH 7,979 56,196 130,589
2016 Census HH 7,544 52,793 122,842
Median HH Income $24,730 $27,966 $30,318
Per Capita Income $10,506 $13,794 $14,853
Average HH Income $34,805 $40,969 $44,025
* # of Employees based on 5 mile radius
SONIC
OFFERING SUMMARY
§ Corporate Guarantee Absolute NNN Lease ( No Landlord Obligations )
§ Less than One Year Remaining (Expires May 31, 2018)
§ Seven Percent Rent-to-Sales Ratio
§ 25,000+ Population within One Mile Radius
§ Signalized Corner Location
§ Less than Three Miles from Downtown San Antonio
INVESTMENT HIGHLIGHTS
Placed perfectly in the heart of Bexar Country straddling South Texas and Central Texas, San Antonio is the second most populous city in the state of Texas. A city on the
rise, San Antonio is in the center of a booming corridor with many business-friendly elements. San Antonio' s historically steady population growth has established a local
market of 2.35 million residents, one that is projected to increase by 27 percent in the coming future. Moreover, there is an increasing population of young professionals
flocking to central San Antonio, enticed by areas such as: Pearl Brewery, Alamo Heights and downtown, which offer an urban lifestyle with endless shopping, nightlife,
cultural, fine dining and employment opportunities.
Sonic Drive-In, more commonly known as Sonic, is an American drive-in fast-food restaurant chain based in Oklahoma City, Oklahoma. As of August 31, 2016, 3,557
restaurants were in 45 U.S. states. In 2011, it was ranked 10th in QSR Magazines rankings of the top 50 quick-service and fast-casual restaurant brands in the nation.
San Antonio, officially the City of San Antonio, is the seventh most populated city in the United States and the second most populous city in the state of Texas, with a
population of 1,409,019. It was the fastest growing of the top 10 largest cities in the United States from 2000 to 2010, and the second from 1990 to 2000. The city
straddles South Texas and Central Texas and is on the southwestern corner of an urban megaregion known as the Texas Triangle. San Antonio serves as the seat of Bexar
County. The city has characteristics of other western urban centers in which there are sparsely populated areas and a low density rate outside of the city limits. San
Antonio is the center of the San Antonio New Braunfels Metropolitan Statistical Area. Commonly referred to as Greater San Antonio, the metropolitan area has a
population of nearly 2.4 million based on the 2015 US Census estimate, making it the 25th largest metropolitan area in the United States and third largest in the state of
Texas.
INVESTMENT OVERVIEW
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12
TENANT PROFILES
SONIC
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SONIC
SONIC®, America’s Drive-In®, is the nation’s largest chain of drive-in restaurants with more than
3,500 drive-ins serving approximately three million customers every day. Over the past 64 years,
SONIC has delighted guests with signature menu items, more than one million drink
combinations, friendly service by iconic Carhops and ongoing support of education through its
award-winning Limeades for Learning® program.
General Information
Tenant Name SONIC
Website www.sonicdrivein.com
Headquartered Oklahoma City
Rentable Square Feet 1,332 SF
Percentage of RBA 100.00%
Lease Commencement 5/31/2013
Lease Expiration 5/31/2018
No. of Locations 3,527
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CLOSE PROXIMITY TO:
422 S Zarzamora St, San Antonio, TX 78207
§ Tenant: Sonic Corp (NASDAQ: Sonc)§ Lease term: 15 yrs + Two 5-Year Opts§ Rent: $60,000/Yr + 6.5% Percentage Rent§ Lease: Absolute NNN (No LL Obligations)§ Exp Date: 5/31/18
Tenant: Sonic Corp (NASDAQ: Sonc)Lease term: Primary 15yrs + Two 5-Year OptionsRent: $60,000yr Plus 6.5% Gross Percentage RentLease Type: Absolute NNN Lease ( No Landlord Obligations)Expiration: May 31, 2018
LOCATION OVERVIEWTENANT SUMMARYPRICING AND VALUATION MATRIX
PROPERTY NAMESONIC
PRICING AND VALUATION MATRIX
PROPERTY NAME
SONIC
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LOCATION OVERVIEW
#
422 S Zarzamora St, San Antonio, TX 78207
LOCATION OVERVIEWTENANT SUMMARYPRICING AND VALUATION MATRIX
PROPERTY NAMESONIC
PRICING AND VALUATION MATRIX
PROPERTY NAME
SONIC
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REGIONAL AND LOCAL MAP
AERIAL PHOTO
SONIC
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PROPERTY SUMMARY
OFFERING SUMMARY
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NOTES
SONIC
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OFFERING SUMMARY
MARCUS & MILLICHAP CAPITAL CORPORATION CAPABILITIESMMCC—our fully integrated, dedicated financing arm—is committed to providing superior capital market expertise, precisely managed execution, and unparalleled access to capital sources providing the most competitive rates and terms.
We leverage our prominent capital market relationships with commercial banks, life insurance companies, CMBS, private and public debt/equity funds, Fannie Mae, Freddie Mac and HUD to provide our clients with the greatest range of financing options.
Our dedicated, knowledgeable experts understand the challenges of financingand work tirelessly to resolve all potential issues to the benefit of our clients.
National platform operating
within the firm’s brokerage offices
$5.1 billion total national
volume in 2016
Access to more capital sources than any other firm in the industry
Optimum financing solutions to enhance value
Our ability to enhance buyer pool by expanding finance options
Our ability to enhance seller control
• Through buyer qualification support
• Our ability to manage buyers finance expectations
• Ability to monitor and manage buyer/lender progress, insuring timely, predictable closings
• By relying on a world class set of debt/equity sources and presenting a tightly underwritten credit file
WHY MMCC?
Closed 1,651 debt and equity
financings in 2016
ACQUISITION FINANCING
SONIC
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MARKET OVERVIEW
SAN ANTONIOOVERVIEW
The San Antonio metro is located in the southern portion of central Texas, covering 412 square miles and straddling the Interstate 35 Corridor, one of the fastest-growing areas in the state. The metro encompasses eight counties: Bandera, Atascosa, Kendall, Comal, Bexar, Guadalupe, Medina and Wilson. Situated only 145 miles from Nuevo Laredo, Mexico, San Antonio is an easy drive on Interstate 35 from the border and serves as a major gateway between the United States and Mexico. The area is further enhanced by an extensive transportation network that provides shipping options to domestic and international markets as well as the Eagle Ford Shale formation that runs through Atascosa and Wilson counties. San Antonio is the most populous city in the metro, housing more than 1.4 million residents.
MARKET OVERVIEW
METRO HIGHLIGHTS
STRONG POPULATION GROWTHThe metro is maintaining strong population growth, boosting household formation and generating the need for housing options.
ROBUST JOB CREATIONMore than 77,300 jobs are expected to be created though 2021. Many positions will be related to Eagle Ford, one of the largest oil and gas developments in the world.
LOW COST OF LIVINGMore affordable home prices compared with other nearby markets and no state personal income tax contribute to a lower the cost of living.
SONIC
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MARKET OVERVIEW
ECONOMY§ The economy is anchored by the industries of healthcare, tourism and national defense. § The Eagle Ford Shale deposit has contributed to the diversification of jobs into the energy
sector. Valero’s corporate headquarters are here, as well as NuStar Energy, Halliburton, NOV, Baker-Hughes and Tesoro.
§ Lackland Air Force Base, Randolph Air Force Base, Fort Sam Houston and Camp Bullis are among the many military installations located in the metro.
§ An important component of the healthcare industry is South Texas Medical Center, a conglomerate of hospitals, clinics and research and higher-education facilities.
SHARE OF 2016 TOTAL EMPLOYMENT
MAJOR AREA EMPLOYERS
South Texas Medical Center
USAA
Wells Fargo
Baptist Health System
Southwest Research Institute
Methodist Healthcare System
JPMorgan Chase
Christus Santa Rosa Health System
Toyota Motor Manufacturing Texas
H-E-B* Forecast
MANUFACTURING5%
GOVERNMENT
HEALTH SERVICESEDUCATION AND
+OTHER SERVICES
4%
LEISURE AND HOSPITALITY FINANCIAL ACTIVITIES
17%AND UTILITIES
TRADE, TRANSPORTATION CONSTRUCTION
PROFESSIONAL ANDBUSINESS SERVICES
2%INFORMATION
13%
5%
17% 13% 8%
15%
SONIC
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MARKET OVERVIEW
DEMOGRAPHICS
SPORTS
EDUCATION
ARTS & ENTERTAINMENT
§ The metro is expected to add nearly 200,000 people through 2021, resulting in the formation of roughly 70,000 households.
§ A relatively youthful population contributes to a homeownership rate of 63 percent, which compares with the national rate of 64 percent.
§ Roughly 26 percent of residents age 25 and older hold a bachelor’s degree; of those residents, 9 percent also have earned a graduate or professional degree.
Culture and history abounds in such places as La Villita, the Spanish Governor’s Palace,
San Fernando Cathedral, Jose Antonio Navarro State Historical Park and the Alamo.
Tradition blends with more modern attractions, such as the River Walk, a 2.5-mile stretch
of parks, cafes, nightclubs and hotels. New upscale apartments are being built along the
walk, bringing more residents into the city. The metro is also home to numerous sporting
events and teams, including the NBA’s San Antonio Spurs, the WNBA’s San Antonio Silver
Stars, the AHL’s Rampage and AA baseball’s Missions. Arena football is offered by the San
Antonio Talons, and the University of Texas San Antonio Roadrunners play NCAA Division
1 football. Art enthusiasts can visit many museums and cultural centers in San Antonio.
34.42016
MEDIAN AGE:
U.S. Median:
37.7
$53,9002016 MEDIAN
HOUSEHOLD INCOME:
U.S. Median:
$57,200
2.4M2016
POPULATION:
Growth2016-2021*:
8%
836K2016
HOUSEHOLDS:
8.8%
Growth2016-2021*:
QUALITY OF LIFE
2016 Population by Age
0-4 YEARS
7%5-19 YEARS
22%20-24 YEARS
7%25-44 YEARS
28%45-64 YEARS
24%65+ YEARS
12%
* Forecast Sources: Marcus & Millichap Research Services; BLS; Bureau of Economic Analysis; Experian; Fortune; Moody’s Analytics; U.S. Census Bureau
SONIC
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2016 Net-Leased Retail Market Overview
Y-O-Y Average Cap Rates down 10 Basis Points
Consumption growth steady as hiring extends into sixth year. The continued
employment growth cycle has helped support consistent gains in retail sales despite
tepid wages. For retail center owners, positive economic momentum has steadily
tightened vacancy without sparking significant construction. To address limited space
availability, retailers have been working with developers to expand the pipeline of
single-tenant floor plans, with deliveries topping 39 million square feet in 2015,
accounting for the vast majority of retail completions. While internationally driven
headwinds prompted some volatility in the first quarter, positive traction has boosted
confidence and limited caution, at least for the short term. Considering bars and
restaurants have been a leading retail growth sector, the outlook for these and other
net-leased assets remains strong.
Investors trading out of other assets via 1031-exchanges lead net-lease buyer
pool. As a growing number of property owners near retirement, many are choosing to
transition their investment portfolios from apartment assets that are trading at a
premium into net-leased retail properties throughout the U.S. Benefits can include
higher initial yields than other low-maintenance options and reduced volatility relative
to other property types. Net-leased properties offer a wide range of choices with
average cap rates in the mid-5 percent range, depending on location and tenancy.
While pending mergers and minimum-wage concerns made headlines in several net-
leased sectors, deal flow was limited by a lack of available listings rather than a
slowdown in demand. Investors typically use cash to close transactions, underscoring
the amount of capital readily available for well-positioned assets with corporate credit
tenants. Although cap rates are likely to remain stable due to the tight spread between
credit financing and prices, willing investors continue to actively search for attractive
offerings. With several states considering more stringent definitions of like-kind
exchanges, potentially limiting where acquisitions can be made, the current demand
for net-leased properties remains robust.
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Y-O-Y Average Cap Ratesdown 10 Basis Points
Y-O-Y Average Cap Ratesdown 50 Basis Points
Y-O-Y Average Cap Ratesdown 20 Basis Points
Y-O-Y Average Cap Ratesdown 20 Basis Points
Net-Lease Assets Favored Amid Limited Development Cycle
Dollar Stores: Although deal flow fell following the announcement of store dispositions by the combined Family Dollar/Dollar Tree, cap rates in the sector slipped into the mid-7 percent band on average. Properties with new leases will change hands with average cap rates in the mid-6 percent range.
Auto-Part Retailers: Auto-part retailer cap rates continue to contract as investors flock to the sector. Average cap rates will begin in the high-5 percent range and extend into the mid-7 percent band, depending on tenancy and location.
Drugstores: Assets with new leases in this space will trade at cap rates starting in the low-5 percent range, with Walgreens commanding a premium to both CVS and Rite Aid. Uncertainty surrounding the Wagreens/Rite Aid merger may slow trading volume.
Quick-Service Restaurants: The average cap rate in the QSR space dropped into the low-5 percent range, with stalwarts including Starbucks and McDonald’s pricing in the mid-4 percent range. Shorter leases and regional credits will push yields closer to 6 percent.
Casual-Dining Establishments: Performance in the sector has become increasingly bifurcated, with new leases dropping trading properties’ caps into the mid-5 percent range. Tenancy and credit considerations will push the top end of the range into the mid-7 percent region.
NATIONAL NET-LEASED RETAIL REPORT
16
SECOND QUARTER 2016
17
Auto-Part Retailers
* Through first quarter** Trailing 12 months through first quarterSources: Marcus & Millichap Research Services; CoStar Group, Inc.
Economy
§ While auto sales have been robust in recent years, the average age of a car on the road is at a
record 11.5 years old, leaving plenty of room for growth to continue. The need to service older
vehicles will push up receipts at auto-parts retailers, providing an attractive net-lease opportunity.
§ Deal flow rose 20 percent over the past year as investors allocated more capital to the sector. Prices
per square foot range from the mid-$150 area for regional operators to the mid-$300 region for
national credit tenants such as AutoZone and Advance Auto Parts.
§ Higher prices were accompanied by tighter cap rates, with initial yields in the mid-6 percent region
nationwide. However, cap rates can vary from the mid-4 percent range for excellent locations with
new leases to the mid-8 percent band for shorter lease terms.
Outlook: The secular trend of aging vehicles will maintain high demand for replacement auto parts,
supporting a tactical acquisition strategy in the sector.
§ Over the past year, the U.S. economy added 2.8 million jobs, expanding total employment 2 percent
as persistent hiring in healthcare and professional services industries combined to add more than
1.3 million positions. While manufacturing and natural resources sectors detracted from gains, all
other groups recorded advancement, supporting broad-based growth.
§ Labor market gains have spilled over into unemployment, which recently hit multidecade lows not
seen since 1973. In addition, the unemployment rate sank 50 basis points to 5 percent, the lowest
level since 2007.
§ Core retail sales, which exclude volatile gasoline prices and auto sales, rose 3.9 percent over the 12
months ending in the first quarter. Several categories, including building materials and healthcare,
vaulted more than 6 percent, indicating consumer readiness to spend in specific areas.
Outlook: Labor market resilience will encourage more new households, supporting additional spending
at retail outlets. As a result, vacancy will decline 30 basis points nationwide to 5.8 percent, while the
average asking rent ticks up 2.8 percent to $18.94 per square foot.
NATIONAL NET-LEASED RETAIL REPORT
17
SECOND QUARTER 2016
18
§ The combined entity of Family Dollar and Dollar Tree is in the process of selling 330 stores following
its merger acceptance by the Department of Justice.
§ Trading contracted 23 percent as investors were much more diligent in their acquisition strategies in
the sector. Prices also fell below $130 per square foot, down from $180 per square foot in the
previous year.
§ First-year yields fell 50 basis points to the mid-7 percent range on average, with most deals pricing
in the high-5 percent to high-8 percent range, depending on lease structure, location and area
demographics. Dollar General stores typically command a premium as investors seek to avoid
tenancy risk by refraining from stores controlled by the combined Family Dollar/Dollar Tree entity.
Outlook: Net-leased buyers have opted to largely pursue other options in the sector, leading to a
contraction of volume and sales activity. This may continue for some time until investors are more
confident in the outlook for store counts.
§ The casual-dining space is undergoing dramatic changes, with fast-casual options gaining market
share from traditional options. Bob Evans announced several store closures due to performance,
joining Bravo Brio and Ovation Brands, the parent of Ryan’s Buffet and Old Country Buffet.
§ Transaction velocity ticked up 8 percent, with dollar volume advancing at a higher rate than closed
deals. Prices can range from $250 per square foot to more than $750 per square foot.
§ First-year yields will vary widely by tenant and location. The best sites will price in the low-5 percent
range to the mid-7 percent region.
Outlook: Investors in the space will be much more focused over the coming year, choosing to pay up for
chains including Chipotle and Panera Bread, while eschewing struggling operators.
Dollar Stores
** Trailing 12 months through first quarterSources: Marcus & Millichap Research Services; CoStar Group, Inc.
Casual-Dining Establishments
NATIONAL NET-LEASED RETAIL REPORT
18
SECOND QUARTER 2016
19
Quick-Service Restaurants
** Trailing 12 months through first quarter Sources: Marcus & Millichap Research Services; CoStar Group, Inc.
Drugstores
§ During the past year, many states have passed laws supporting a $15 per hour minimum wage,
prompting investors to contemplate the results of this change. While the effect is unknown right now,
buyers may slow their rate of capital deployment in the sector until more information is available.
§ Deal flow rose dramatically over the past year, with price per square foot exceeding $900 in primary
markets on assets with corporate tenants signed under long-term leases. Overall, prices can range
from $400 to $1,000 per square foot, indicating the wide range of pricing depending on tenancy.
§ Cap rates in the sector fell into the low- to mid-5 percent range, with stalwarts including Starbucks
and McDonald’s often commanding a lower premium.
Outlook: Brand power will overcome minimum-wage concerns in most markets as buyers seek safety
by purchasing net-leased assets in the QSR space that are leased by a Fortune 500 tenant.
§ During the past year, the drugstore segment was catalyzed by the proposed merger between
Walgreens and smaller rival Rite Aid. While the tie-up has yet to be approved by regulators, investors
have had to confront the possibility of store closures in some markets as a result of an approval.
§ Transaction prices increased marginally over the past year, varying from $400 to $700 per square
foot, depending on leasing terms and location. Walgreens garnered an average price of nearly $500
per square foot, while CVS storefronts priced at an average of $550 per square foot as buyers
sidestepped the possible merger risk by picking up CVS offerings.
§ During the last year, first-year yields sank roughly 20 basis points on average to the mid-5 percent
range, although prices can vary widely by tenancy. Walgreens stores typically price in the low- to
mid-5 percent range, while CVS locations are typically in the mid- to high-5 percent band.
Outlook: Uncertainty surrounding the Walgreens/Rite Aid merger will continue to drive sentiment in the
drugstore space in 2016. However, safety of yield and hands-off management will push investors to
deploy capital in the sector.
NATIONAL NET-LEASED RETAIL REPORT
19
SECOND QUARTER 2016
Capital Markets Recent Marcus & Millichap Transactions
§ The U.S. economy grew nominally in the first quarter as respectable consumer
trends were partly offset by softness in manufacturing, exports and business
investment. The lull in economic activity in the first three months of 2016, and
volatility in the stock and debt markets, will likely delay any action on monetary
policy by the Federal Reserve until midyear at the earliest. Against this broader
economic backdrop, retail properties continued to gain traction behind growing
space demand and limited construction. This year, retailers will absorb an
additional 61 million square feet of space to cut the U.S. vacancy rate 30 basis
points to 5.9 percent.
§ CMBS issuance declined in the first quarter from the corresponding period one
year ago, offering the latest evidence of disruption in the securitized market.
Although spreads on the highest-rated bonds in a securitized pool compressed
slightly during this year’s opening quarter, they remain wider than one year ago,
meaning borrowers face slightly higher costs. Bond investors also require higher
returns on loans perceived as being aggressively underwritten with higher LTVs and
on loans issued to lower-rated borrowers, putting a squeeze on securitized lenders
that could potentially limit lending capacity.
§ Bank lenders remain positioned and capitalized to compete for market share,
perhaps gaining business that CMBS cannot fill. The Federal Reserve’s
accommodative monetary stance continues to support a low cost of capital to
these lenders. National, regional and local banks offer leverage on retail property
loans that averages in the 65 percent range and loan terms vary from five, seven
and 10 years. Spreads vary depending on asset location and quality but generally
start in the low- to mid-200-basis-point range above corresponding swap rates.
Bridge financing spread over short-term benchmarks is also available for properties
in transition.
20
Property Name City, State Sales Price Price perSq. Ft. Cap Rate
Wal-Mart Neighborhood Market
Murfreesboro, TN $14,858,956 $345 5.2%
Walgreens Sauk Rapids, MN $11,517,857 $795 5.6%
Red Lobster Atlanta, GA $8,278,252 $1,122 6.2%
CVS Lago Vista, TX $6,355,160 $451 6.0%
McDonald’s Tacoma, WA $4,933,000 $1,083 3.8%
Advance Auto Parts Ft. Lauderdale, FL $3,404,261 $486 5.8%
Panera Bread New Berlin, WI $3,100,000 $715 4.8%
Jack in the Box Granada Hills, CA $3,000,000 $1,429 4.8%
Popeyes Lakewood, WA $3,000,000 $1,391 5.0%
Taco Bell Las Vegas, NV $2,598,500 $1,071 5.0%
Applebee’s Delray Beach, FL $2,525,000 $531 5.5%
Starbucks Sugar Land, TX $2,360,000 $1,276 5.0%
Dollar General Medford, OR $2,250,000 $250 6.0%
Buffalo Wild Wings Olive Branch, MS $2,166,000 $393 7.5%
Wendy’s Jenison, MI $2,163,200 $640 6.0%
Family Dollar Arabi, LA $1,892,677 $206 6.5%
Pep Boys Harrisburg, NC $1,740,000 $314 6.0%
Denny’s Warwick, RI $1,710,000 $428 6.2%
Burger King Crystal Lake, IL $1,650,000 $420 5.9%
Pizza Hut Coraopolis, PA $1,400,000 $389 6.5%
Jimmy John’s Austin, TX $1,175,000 $592 5.4%
NATIONAL NET-LEASED RETAIL REPORT
20
SECOND QUARTER 2016
PROPERTY NAME
MARKETING TEAM
SONIC
DEMOGRAPHICS
Source: © 2016 Experian
Created on October 2017
POPULATION 1 Miles 3 Miles 5 Miles§ 2021 Projection
Total Population 27,051 174,666 402,815
§ 2016 Estimate
Total Population 27,116 173,991 399,620
§ 2010 Census
Total Population 25,222 161,900 371,772
§ 2000 Census
Total Population 27,240 171,192 382,695
§ Current Daytime Population
2016 Estimate 24,970 256,069 473,760
HOUSEHOLDS 1 Miles 3 Miles 5 Miles§ 2021 Projection
Total Households 8,018 57,087 132,672
§ 2016 Estimate
Total Households 7,979 56,196 130,589
Average (Mean) Household Size 3.20 2.85 2.88
§ 2010 Census
Total Households 7,544 52,793 122,842
§ 2000 Census
Total Households 7,764 52,613 123,119
§ Occupied Units
2021 Projection 8,018 57,087 132,672
2016 Estimate 8,419 59,079 138,061
HOUSEHOLDS BY INCOME 1 Miles 3 Miles 5 Miles§ 2016 Estimate
$150,000 or More 0.70% 1.86% 2.00%
$100,000 - $149,000 2.66% 4.00% 4.77%
$75,000 - $99,999 4.49% 6.02% 6.32%
$50,000 - $74,999 13.47% 14.17% 15.26%
$35,000 - $49,999 13.16% 13.95% 14.85%
Under $35,000 65.05% 59.43% 56.25%
Average Household Income $34,805 $40,969 $44,025
Median Household Income $24,730 $27,966 $30,318
Per Capita Income $10,506 $13,794 $14,853
HOUSEHOLDS BY EXPENDITURE 1 Miles 3 Miles 5 MilesTotal Average Household Retail Expenditure $47,087 $50,333 $51,896
§ Consumer Expenditure Top 10 Categories
Housing $13,129 $13,864 $14,222
Transportation $9,287 $9,891 $10,256
Shelter $7,156 $7,510 $7,685
Food $5,681 $5,952 $6,107
Utilities $3,572 $3,682 $3,753
Health Care $3,325 $3,479 $3,533
Personal Insurance and Pensions $2,703 $3,173 $3,372
Entertainment $1,682 $1,883 $1,962
Apparel $1,425 $1,471 $1,513
Household Furnishings and Equipment $1,159 $1,295 $1,347
POPULATION PROFILE 1 Miles 3 Miles 5 Miles§ Population By Age
2016 Estimate Total Population 27,116 173,991 399,620
Under 20 33.54% 28.26% 29.12%
20 to 34 Years 22.06% 23.15% 22.85%
35 to 39 Years 5.56% 6.00% 6.09%
40 to 49 Years 11.04% 12.27% 12.31%
50 to 64 Years 16.30% 17.00% 16.98%
Age 65+ 11.52% 13.32% 12.66%
Median Age 30.55 33.93 33.53
§ Population 25+ by Education Level
2016 Estimate Population Age 25+ 15,791 110,803 251,159
Elementary (0-8) 21.18% 17.52% 15.79%
Some High School (9-11) 19.31% 17.90% 16.70%
High School Graduate (12) 31.69% 29.50% 30.83%
Some College (13-15) 13.04% 16.87% 18.04%
Associate Degree Only 3.48% 3.68% 4.20%
Bachelors Degree Only 3.83% 6.12% 6.61%
Graduate Degree 1.43% 3.61% 3.87%
21
IncomeIn 2016, the median household income for your selected geography is $24,730, compare this to the US average which is currently $54,505. The median household income for your area has changed by 17.35% since 2000. It is estimated that the median household income in your area will be $27,977 five years from now, which represents a change of 13.13% from the current year. The current year per capita income in your area is $10,506, compare this to the US average, which is $29,962. The current year average household income in your area is $34,805, compare this to the US average which is $78,425.
PopulationIn 2016, the population in your selected geography is 27,116. The population has changed by -0.46% since 2000. It is estimated that the population in your area will be 27,051.00 five years from now, which represents a change of -0.24% from the current year. The current population is 49.19% male and 50.81% female. The median age of the population in your area is 30.55, compare this to the US average which is 37.68. The population density in your area is 8,638.46 people per square mile.
HouseholdsThere are currently 7,979 households in your selected geography. The number of households has changed by 2.77% since 2000. It is estimated that the number of households in your area will be 8,018 five years from now, which represents a change of 0.49% from the current year. The average household size in your area is 3.20 persons.
EmploymentIn 2016, there are 5,629 employees in your selected area, this is also known as the daytime population. The 2000 Census revealed that 34.33% of employees are employed in white-collar occupations in this geography, and 65.22% are employed in blue-collar occupations. In 2016, unemployment in this area is 6.34%. In 2000, the average time traveled to work was 25.00 minutes.
Race and EthnicityThe current year racial makeup of your selected area is as follows: 69.20% White, 1.74% Black, 0.04% Native American and 0.23% Asian/Pacific Islander. Compare these to US averages which are: 70.77% White, 12.80% Black, 0.19% Native American and 5.36% Asian/Pacific Islander. People of Hispanic origin are counted independently of race. People of Hispanic origin make up 95.52% of the current year population in your selected area. Compare this to the US average of 17.65%.
PROPERTY NAME
MARKETING TEAM
SONIC
HousingThe median housing value in your area was $61,906 in 2016, compare this to the US average of $187,181. In 2000, there were 4,452 owner occupied housing units in your area and there were 3,312 renter occupied housing units in your area. The median rent at the time was $286.
Source: © 2016 Experian
DEMOGRAPHICS
22
www.MarcusMillichap.com
Timothy Speck
Broker
Dallas OfficeTel: (972) 755-5200Fax: (972) 755-5210
License: TX 432723
P R E S E N T E D B Y
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