Single Tenant Investment Opportunity Long Term, Absolute Triple Net Lease with 2% Annual Increases
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Single Tenant Investment Opportunity
Long Term, Absolute Triple Net Lease with 2% Annual Increases
The Grocery Anchor of a Neighborhood Shopping Center in Los Angeles County (Palmdale, CA)
with a portion subleased to Dollar Tree (S&P: BBB-)
Jones Lang LaSalle Americas, Inc. (“JLL”), real estate license #01223413
TABLE OF
CONTENTS
EXECUTIVE SUMMARY......... 3
PROPERTY OVERVIEW........12
AREA & MARKET
OVERVIEW............................. 16
Investment Advisors
NICK FOSTER ADAM FRIEDLANDER KEVIN CHANG
949.798.4135 949.527.4978 949.798.4113
nicholas.foster@am.jll.com adam.friedlander@am.jll.com kevin.chang@am.jll.com
CA Lic. #01831851 CA Lic. #01806555 CA Lic. #01976724
2 | Introduction |
EXECUTIVE SUMMARY
3 | EXECUTIVE SUMMARY |
THE OPPORTUNITY INVESTMENT OVERVIEW
YEAR 1 NOI (1): $1,168,043 ($1.68 PSF/Mo)
JLL, as exclusive advisor, is pleased to offer the exceptional opportunity to purchase the fee simple
LEASE TYPE: Absolute NNN
interest in Smart & Final (the “Property”), located in the Los Angeles County city of Palmdale, CA.
The property was renovated in 2016, and Smart & Final’s lease is Absolute NNN with over 14 years REMAINING LEASE TERM: Over 14 Years
left of original term and 2% annual increases. The 58,033 SF building is 100% master leased to
RENT ESCALATIONS: 2.0% Annual
Smart & Final Stores, LLC. At the tenant’s cost, the building was demised to suit Smart & Final’s
typical floor size. The remaining 17,300 SF is subleased to Dollar Tree (S&P: ‘BBB-’), a nationally RENT COMMENCEMENT: February 2015
recognized retailer that will draw greater customer traffic volumes to the area. The Property is the February 2035
LEASE EXPIRATION DATE:
anchor of Quartz Hill Plaza, a 96% leased, 76,033 SF shopping center with national brand tenants
Two, 10-Year Options at
that include Carl’s Jr., Del Taco, Little Caeser’s Pizza and AutoZone. Contractual Rent
OPTIONS:
2% Annual Increases
through Options
PRICE: $18,689,000 TENANT: SMART & FINAL STORES LLC
CAP RATE: 6.25% PERCENTAGE LEASED: 100%
(1) Annual NOI as of March 1, 2021. Seller to provide a credit for rent differential at close.
PROPERTY DESCRIPTION
5038 W Avenue N
ADDRESS:
Palmdale, CA 93551
RENTABLE BUILDING AREA: 58,033 SF
LAND AREA: ± 6.57 Acres
YEAR BUILT: 2004 (Renovated in 2016)
40,733 SF (Occupied by Smart & Final)
PROPERTY BIFURCATION: 17,300 SF (Subleased to Dollar Tree)
58,033 SF TOTAL
TYPE OF OWNERSHIP: Fee Simple
Unencumbered: Available for
DEBT:
New Market Rate Financing
4 | EXECUTIVE SUMMARY |
INVESTMENT HIGHLIGHTS
NNN LEAS E TO A LE ADI N G SUPER M AR KET OPERATOR
Smart & Final is a leading privately held supermarket chain headquartered in
California. In business for over 145 years, the company operates over 250 stores in
the US and Mexico.
LO NG TERM LEAS E W I T H AT T RACT I VE R EN T I N CR EASES
Smart & Final’s 20 year lease currently has over 14 years of fixed lease term remaining
offering stability for an investor. Fixed 2% annual increases throughout the initial
lease term and option periods.
S IG NIFICANT TENAN T I N VEST M EN T & VALUE CR EAT I ON
When Smart & Final assumed the 20 year lease, they immediately demised the
building at their expense to create two smaller and more attractive retail footprints.
INVESTMENT G RADE SUBL EASE
Dollar Tree (S&P: BBB-) is one of the world’s largest discount retailers in the world
with over 15,000 locations and $22 billion in revenue. The sublease provides the
optimal footprint for Smart & Final as well as enhanced traffic to the location.
5 | EXECUTIVE SUMMARY |
SHOPPING CENTER TENANTS
INVESTMENT HIGHLIGHTS (CONTINUED) (NOT INCLUDED)
MINIMAL CO MP ETITI ON AN D UPWAR D SAL ES T R EN D
There are no competitors within a 2-mile drive of this location, creating
a captive audience out of the residents in the area. This competitive
advantage has fueled the Property’s 18% unit-level sales growth since 2017.
NO OWNER RES P O NSI BI L I T I ES
Smart & Final is a single tenant, NNN Property with no landlord
responsibilities or management requirements.
STRO NG INFLATIO N H EDGE
Scheduled annual fixed rental increases produce high NOI growth,
enhancing future cash on cash returns and providing a strong hedge
against inflation.
HIG H TRAFFIC, INFIL L R ESI DEN T I AL LOCAT I ON
The Property is located at the signalized intersection of W Avenue N and
50th Street in a densely populated residential area of Palmdale that sees
traffic counts of 25,645 VPD.
6 | EXECUTIVE SUMMARY |
TENANT OVERVIEW SMART & FINAL
Smart & Final Funding LLC - S&P Credit Rating: B
255 Stores
Founded: 1871
Headquarters: Commerce, CA
smartandfinal.com
Smart & Final is a value-oriented food retailer that sells a wide variety of perishables,
groceries, and household products. Since opening its first location in 1871, Smart & Final
has grown into one of the largest supermarket operators in the Western United States with
over 250 locations across California, Arizona, and Nevada. Smart & Final was acquired by
Apollo Global Management in 2019. Apollo Global Management has approximately $68
billion in assets under management with a proven track record of growing consumer and
retail brands including Sprouts Farmers Market, The Fresh Market, Hostess, and Qdoba.
COMPETITIVE ADVANTAGE
Smart & Final operates under a non-membership, junior-box warehouse store format.
Under this format, Smart & Final is able to offer an extensive selection of national and
private label goods that total to over 16,000 SKUs, including 3,000 club-sized items. This
broad selection of national and private label goods allows Smart & Final to set much lower
prices than conventional grocers, and the chain’s club-sized items offer a typical warehouse
club store experience without the standard club membership fee. In 2019, Smart & Final
revamped its online shopping portals and mobile application service in order to enhance
the overall customer experience and grow the company’s customer base through online
order and delivery.
HIGHLIGHTS
• 5 consecutive years of positive net sales growth for Smart & Final stores
• #24 on Forbes’ 2019 list of “America’s Largest Private Companies”
• 4th largest grocery operator in California by store count (240 stores)
7 | EXECUTIVE SUMMARY |
LEASE ABSTRACT
SMART & FINAL STORES LLC,
NOI SCHEDULE
TENANT:
a California limited liability company
NOI SCHEDULE - PALMDALE SMART & FINAL
GURARANTOR: SMART & FINAL LLC (Corporate) RENT START MONTHLY MONTHY/SF ANNUAL ANNUAL/SF INCREASE
5038 W Avenue N, Palmdale, CA MARCH 1, 2020 $95,390 $1.64 $1,144,682 $19.72 2.0%
ADDRESS:
February 12, 2015 MARCH 1, 2021 $97,337 $1.68 $1,168,043 $20.13 2.0%
DATE OF LEASE:
February 28, 2035 MARCH 1, 2022 $99,284 $1.71 $1,191,404 $20.53 2.0%
LEASE EXPIRATION:
Twenty (20) Years MARCH 1, 2023 $101,269 $1.75 $1,215,232 $20.94 2.0%
LEASE TERM:
Two (2) Extensions of Ten (10) Years MARCH 1, 2024 $103,295 $1.78 $1,239,537 $21.36 2.0%
RENEWAL OPTIONS:
Current Annual Rent as of March 1, 2021: $1,168,043 MARCH 1, 2025 $105,361 $1.82 $1,264,327 $21.79 2.0%
($1.68 PSF/Mo)
2% Annual Increases MARCH 1, 2026 $107,468 $1.85 $1,289,614 $22.22 2.0%
Annual Rent Adjustment Date: March 1
RENT SCHEDULE: MARCH 1, 2027 $109,617 $1.89 $1,315,406 $22.67 2.0%
Option Periods:
Two (2) extensions of ten (10) years
MARCH 1, 2028 $111,810 $1.93 $1,341,714 $23.12 2.0%
2% Annual Increases Throughout
Option Periods
MARCH 1, 2029 $114,046 $1.97 $1,368,549 $23.58 2.0%
PERCENTAGE RENT: None
MARCH 1, 2030 $116,327 $2.00 $1,395,920 $24.05 2.0%
RIGHT OF FIRST REFUSAL: No purchase option or right of first refusal
MARCH 1, 2031 $118,653 $2.04 $1,423,838 $24.53 2.0%
Tenant is required to execute an estoppel certificate
within twenty (20) days upon receipt from the
ESTOPPEL: MARCH 1, 2032 $121,026 $2.09 $1,452,315 $25.03 2.0%
Landlord, Landlord’s lender, or potential purchaser
of the subject Property.
MARCH 1, 2033 $123,447 $2.13 $1,481,361 $25.53 2.0%
Common Area Charges: Pro Rata Share equal to
100%
TENANTS PRO RATA SHARE: MARCH 1, 2034 $125,916 $2.17 $1,510,988 $26.04 2.0%
Real Estate Taxes: Equal to the amount of Tenant’s
Tax Parcel, or the Pro Rata Share equal to 100%
8 | EXECUTIVE SUMMARY |
LEASE ABSTRACT (CONTINUED)
REAL ESTATE TAXES:
Tenant shall pay all taxes and assessments of every type or nature assessed against or imposed upon the subject Property
TENANT RESPONSIBLE
COMMON AREA EXPENSES: Tenant shall solely be responsible for performing maintenance, repair, replacement, and other activities as required for the
TENANT RESPONSIBLE Common areas and shall be fully responsible for paying all related expenses.
Tenant shall maintain, with respect to the Property, at Tenant’s sole expense, Property insurance, commercial liability insurance,
INSURANCE: workers compensation insurance, rental value insurance, equipment breakdown insurance, automobile liability insurance,
TENANT RESPONSIBLE builders risk insurance, and any other insurance customarily carried by owners or tenants with respect to improvements and
personal Property.
UTILITIES: Tenant shall contract, in its own name, for and pay when due all charges for the connection and use of water, gas, electricity,
TENANT RESPONSIBLE telephone, garbage collection, sewer use and other utility services supplied to the Property during the lease term.
Tenant shall, as its sole cost and expense keep all building, structures and improvements erected at the subject Property in
good working order and repair including without limitation, the roof and the HVAC and other electrical and mechanical systems.
REPAIRS AND MAINTENANCE: Tenant shall also at its sole cost and expenses repair or reconstruct any building, structure or improvement at the subject
TENANT RESPONSIBLE Property that has been damaged or destroyed by a casualty. Tenant shall make all necessary structural, non-structural, exterior
and interior repairs to the subject Property. Tenant waives any right to require Landlord to maintain, repair or rebuild any part of
the subject Property or make repairs at the expense of the Landlord.
REASSESSMENT Tenants shall have reassessment protection during the first 5 years following the first landlord transfer that occurs after the
PROTECTION: effective date of the lease. THIS CLAUSE DOES NOT AFFECT THIS SALE.
9 | EXECUTIVE SUMMARY |
116,622 RESIDENTS
IN A 5-MILE RADIUS
5 0 TH
ST R
EET
W (1
5 ,0 00 V
PD)
)
5 VPD
64
( 1 0,
N
UE
V EN
A
W.
10 | EXECUTIVE SUMMARY |SITE PLAN
W. AVENUE N (10,645 VPD)
50TH STREET W. (15,000 VPD)
11 | EXECUTIVE SUMMARY |PROPERTY OVERVIEW
12 | PROPERTY OVERVIEW |DEMOGRAPHICS
POPULATION
1-MILE 3-MILE 5-MILE
2020 TOTAL POPULATION: 10,545 50,215 116,622
2025 POPULATION: 10,612 50,787 119,017
POP. GROWTH 2020 - 2025: 0.64% 1.14% 2.05%
MEDIAN AGE: 42.3 38.4 35.7
HOUSEHOLDS
2020 TOTAL HOUSEHOLDS: 3,448 16,039 35,179
HH GROWTH 2020 - 2025: 0.06% 0.55% 1.50%
AVERAGE HH INCOME: $135,532 $113,452 $105,376
HOUSING
MEDIAN HOME VALUE: $428,145 $408,133 $383,846
MEDIAN YEAR BUILT: 1991 1990 1990
13 | PROPERTY OVERVIEW |LOCATION MAP
14 | PROPERTY OVERVIEW |PROPERTY OVERVIEW
SITE DETAILS
NAME Smart & Final
5038 West Avenue N
ADDRESS
Palmdale, California 93551
Single-tenant Grocery Store
PROPERTY USE
(includes pharmacy and bank branch inside)
PARCEL SIZE (ACRES) ± 6.57 Acres
NUMBER OF BUILDINGS One
NET RENTABLE AREA (SF) 58,033
YEAR BUILT 2004
Cast-in-place conventionally reinforced concrete perimeter
FOUNDATION / SUBSTRUCTURE footings beneath load bearing walls, and isolated pad
footings beneath load bearing columns
SUPERSTRUCTURE Steel and concrete masonry unit (CMU)
FAÇADE Stucco and CMU
Flat / low-slope with a single-ply thermoplastic membrane.
ROOF SYSTEM
Limited pitched roofs with mission style concrete tiles
PARKING AREA Asphalt
PARKING SPACE COUNT 137
ADA-COMPLIANT PARKING
Five accessible spaces and three van-accessible spaces
COUNT
HEATING SYSTEM Air handler with electric heat, rooftop packaged units
COOLING SYSTEM Central cooling tower and chillers, rooftop packaged units
WATER SUPPLY PIPING Copper
ELECTRICAL SUPPLY WIRING Copper
NUMBER OF ELEVATORS None
FIRE SUPPRESSION Wet-pipe sprinkler system
15 | PROPERTY OVERVIEW |AREA & MARKET OVERVIEW
16 | AREA & MARKET OVERVIEW |ANTELOPE VALLEY’S LARGEST EMPLOYERS
EDWARDS AIR FORCE BASE 8,929
NAVAL WEAPONS AIR STATION - CHINA LAKE 7,995
LOCKHEED MARTIN 3,700
NORTHROP GRUMMAN 2,800
MOJAVE AIR & SPACEPORT 2,500
ANTELOPE VALLEY HOSPITAL 2,425
NORTHROP GRUMMAN 2,100
ANTELOPE VALLEY
NASA ARMSTRONG FLIGHT RESEARCH CENTER 1,370
Antelope Valley is home to a large number of high desert communities that have experienced phenomenal
growth in recent years by assuming the role of a Los Angeles Basin commuter suburb. Antelope Valley KAISER PERMANENTE 1,270
has many natural resources of wind and solar which contribute to California’s aggressive renewable
energy efforts causing many companies to relocate to the area. Antelope valley offers easy access to key PALMDALE REGIONAL MEDICAL CENTER 1,100
transportation corridors, rail service, and three of the country’s top seaports that have all helped drive the
development of high technology enterprises in the region. BOEING 850
PALMDALE OFFERS NUMEROUS PRO-BUSINESS INCENTIVES FOR GLOBAL BUSINESSES INCLUDING:
HIGHER LEARNING
BUSINESS
INSTITUTIONS
FRIENDLY
Palmdale Institute of
ZONES
Technology, Antelope Valley
Antelope Valley
AEROSPACE CAPITAL OF THE WORLD College, CSU Bakersfield,
Enterprise Zone &
The Boeing Company, Northrop Grumman Chapman University, University
Foreign-Trade Zone
Corporation, AERO Institute, and Lockheed Martin of La Verne, University of
Aeronautics Company Phoenix, and CSU Fresno
17 | AREA & MARKET OVERVIEW |PALMDALE MARKET OVERVIEW
Palmdale is the 6th largest city in Los Angeles County with over 162,000 residents and 2,000 businesses that are mainly focused in aerospace, energy, environmental,
and scientific research. Palmdale is home to some of the world’s largest aerospace companies as well as a growing number of high-tech manufacturers. Boeing
has over 850 employees at the Palmdale Edwards Air Force Base and is a key contributor to growth in the region. Palmdale is also home to other major aerospace
companies including Lockheed Martin and Northrop Grumman. While Palmdale is known for its role in the aerospace industry, the city has diversified its economy with
a growing presence from manufacturing and engineering companies such as Patton Steel, US Pole Company, Vision Engineering, and Delta Scientific Corporation.
Recent developments in Palmdale include the groundbreaking of Lockheed Martin’s new 208,000 SF advanced manufacturing facility and US Tool Group’s new
30,000 SF warehouse and office facility.
18 | AREA & MARKET OVERVIEW |ANTELOPE VALLEY RETAIL MARKET
Net Absorption vs Vacancy
200,000 9.0%
150,000 8.0%
7.0%
100,000
6.0%
50,000
5.0%
0
4.0%
(50,000)
3.0%
(100,000)
2.0%
(150,000) 1.0%
(200,000) 0.0%
2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Net Absorption Vacancy Rate
ANTELOPE VALLEY RETAIL SUBMARKET 2Q2020
TOTAL RBA: 16,124,198
# OF BUILDINGS: 1,178
VACANCY: 5.90%
UNDER CONSTRUCTION (SF): 17,132
2020 DELIVERIES (SF): 76,300
2019 DELIVERIES (SF): 14,568
2020 YTD NET ABSORPTION (SF): 31,980
Source: CoStar
19 | AREA & MARKET OVERVIEW |Investment Advisors NICK FOSTER ADAM FRIEDLANDER KEVIN CHANG 949.798.4135 949.527.4978 949.798.4113 nicholas.foster@am.jll.com adam.friedlander@am.jll.com kevin.chang@am.jll.com CA Lic. #01831851 CA Lic. #01806555 CA Lic. #01976724 Jones Lang LaSalle Americas, Inc. or its state-licensed affiliate (“JLL”) has been engaged by the owner of the property to market it for sale. Information concerning the property described herein has been obtained from sources other than JLL, and neither Owner nor JLL, nor their respective equity holders, officers, directors, employees and agents makes any representations or warranties, express or implied, as to the accuracy or completeness of such information. Any and all reference to age, square footage, income, expenses and any other property specific information are approximate. Any opinions, assumptions, or estimates contained herein are projections only and used for illustrative purposes and may be based on assumptions or due diligence criteria different from that used by a purchaser. JLL and owner disclaim any liability that may be based upon or related to the information contained herein. Prospective purchasers should conduct their own independent investigation and rely on those results. The information contained herein is subject to change. The Property may be withdrawn without notice. If the recipient of this information has signed a confidentiality agreement regarding this matter, this information is subject to the terms of that agreement. ©2020. Jones Lang LaSalle IP, Inc. All rights reserved. JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion, operations in over 80 countries and a global workforce of more than 94,000 as of March 31, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.
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