Conf iden t i a l Of fe r ing Memorandum
1700 High S t ree t
De lano , CA 93215
Smart & Final15+ Years Remaining | NNN Lease | Corporate Guarantee
2Smart & Final – Delano, CA
The OfferingJLL is pleased to offer for sale the fee-simple interest in a Smart & Final (the “Property” or “Asset”) located in Delano, California. The Property is tenanted by Smart and Final Stores LLC on a corporate
guaranteed triple-net lease with over 15 years of primary lease term remaining. The lease features 7.50% rent escalations every five years throughout the primary term and in each of the three, five-year
renewal options. Smart & Final’s operating history at the Property spans over 35 years, reflecting the strength and success of this location as well as company’s commitment to serve the Delano community.
The Asset offers investors the opportunity to acquire successful grocery chain on a long-term lease with below market rent and absolutely zero landlord responsibilities.
Investment Highlights
Long-Term NNN Lease with Corporate GuaranteeSmart & Final Stores LLC has over 15 years of primary term remaining on a corporate guaranteed triple-net lease with absolutely zero landlord responsibilities and 7.50% rent escalations every five years
throughout the primary term and in each of the three, five-year renewal options.
Strong Tenancy with Long Operating HistorySmart & Final has operated at this location for more than 35 years, reflecting the tenant’s commitment to this location and to the Delano community. Smart & Final is a California-based food retailer that
operates over 300 grocery and foodservice stores and achieved $4.57 billion in sales in 2017.
Prime Location in Delano Retail CorridorThe Property is located in Delano Village Shopping center along Cecil Avenue, a retail thoroughfare featuring national tenants such as Walgreens, 99 Cent Only, True Value, O’Reilly Auto Parts, Starbucks andMcDonald’s. California Route 99 is located 0.5 miles west of the Property and Delano High School is located 0.5 miles east of the Property, providing exposure to the area’s major traffic drivers.
3Smart & Final – Delano, CA
Close Proximity to California Route 99The Property is strategically located just 0.5 miles east of California Route 99, a highly-trafficked North-South state highway connecting Bakersfield
to Sacramento.
Low In-Place RentThe tenant pays low in-place rent of $8.95 per square foot, ultimately increasing the likelihood that the tenant will commit to this location long term
while offering a low purchase price.
Committed TenantSmart & Final has served the Delano community at this location for over 35 years, indicating the company’s long-lasting success and commitment to
the Property.
Recently Renovated PropertyThe Property underwent extensive renovations in 2014.
PROPERTY SUMMARY
Location1700 High Street
Delano, CA 93215
Purchase Price / PSF $5,555,832 / $167
Cap Rate 5.35%
NOI* / PSF $297,237 / $8.95
Building Size + / - 33,200 SF
Year Built / Renovated 1986 / 2014
Site Size + / - 3.37 acres
Ownership Interest Fee Simple
Tenant Smart & Final Stores LLC
Lease Type Absolute NNN
Remaining Lease Term 15.8 years (as of August 2018)
Lease Expiration 6/30/2034
Rent Escalations 7.50% every 5 years
Renewal Options 3 x 5-year options
*Based on 2019 rent escalation
RENT SCHEDULE
Year Annual Base Rent Rent PSF
Primary Term
7/1/2014 – 6/30/2019 $276,500 $8.33
7/1/2019 – 6/30/2024 $297,237 $8.95
7/1/2024 – 6/30/2029 $319,530 $9.62
7/1/2029 – 6/30/2034 $343,495 $10.35
Renewal Options
Option 1: 7/1/2034 – 6/30/2039 $369,257 $11.12
Option 2: 7/1/2039 – 6/30/2044 $396,951 $11.96
Option 3: 7/1/2044 – 5/30/2049 $426,723 $12.85
4Smart & Final – Delano, CA
5Smart & Final – Delano, CA
S m a r t & F i n a lSmart & Final Stores, Inc. operates more than 300 grocery and foodservice stores under the “Smart & Final,” “Smart & Final Extra!” and “Cash &
Carry Smart Foodservice” banners in California, Oregon, Washington, Arizona, Nevada, Idaho and Utah, with an additional 15 stores in Northern
Mexico operated through a joint venture.
For years, Smart & Final banner stores were known as the “smaller, faster warehouse store,” primarily focused on providing customers with club-
size items. Throughout its evolution, it has remained committed to adapting to the changing needs of the neighborhoods it serves, most notably
through its 2008 introduction of Smart & Final Extra! stores. Uniquely positioned to offer time-and-money savings for both household and
business customers, Smart & Final Extra! stores include expanded fresh and frozen products, organic and natural products, bulk foods, oven-
roasted chicken and many other items sold in convenient sizes. In addition, all Smart & Final stores continue to offer 50% more club-size items
than a traditional club store, with no membership fee required.
The company has seen five consecutive years of sales growth, including $4.57 billion in sales in 2017, marking a 5.3 percent growth in sales
from the previous fiscal year. Based on the company’s second quarter report, sales as of July 2018 were up 4.4 percent from the previous year,
on pace for another year of sales growth.
COMPANY OVERVIEW
Company Smart & Final Stores, Inc.
Type Public (NYSE: SFS)
Credit Rating (Moody’s) B3
Founded 1871
Headquarters Commerce, CA
Employees (2017) 10,000+
Number of Locations 300+
Revenue (FY2017) $4.57 billion
Assets (FY2017) $1.81 billion
Market Cap (2018) $508 million
$3.21$3.53
$3.97$4.34
$4.57
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
2013 2014 2015 2016 2017
Net
Sale
s (
Bill
ions)
Fiscal Year
Net Sales
2 Q 20 1 8 H i g h l i g h t s• Net sales increased 4.4% to $1.1 billion with a comparable store sales increase of 1.3%
• Gross margin increased 4.6% to $169.7 million
• Adjusted EBITDA increased 2.5% to $49.3 million
• Net income of $6.6 million or $0.09 per share
• Adjusted net income of $11.4 million or $0.16 per share
6Smart & Final – Delano, CA
Aerial and Retai l Map
The Asset is located in the Delano Village Shopping Center, proximate to a variety of national and local retailers along Cecil Avenue. Delano High School is only a few blocks east of the Asset and drives significant traffic to the immediate area. The Asset is located just off of California Route 99, a highly trafficked North-South state highway connecting Bakersfield to Sacramento.
7Smart & Final – Delano, CA
Delano Overview
Delano is a city located in Kern County, located 30 miles northwest of Bakersfield, California. Delano is part of the central valley
and Bakersfield MSA, where agriculture is the primary industry. Kern County is also the most productive oil producing county and
fourth most productive agricultural county in the United States. The population has risen over the past decade by over 35 percent
from 41,925 to 56,925. Delano is the second largest city in Kern County behind Bakersfield. The Bakersfield MSA has a population
of 839,361 residents.
The subject property is in a strong retail location on High Street and Inyo Street in the Delano Village Shopping Center within close
proximity to California Route 99, a highly trafficked North-South state highway connecting Bakersfield to Sacramento. National and
local retail stores in the immediate area include Walgreens, 99 Cent Only, True Value, O’Reilly Auto Parts, Starbucks and
McDonald’s.
Loc at ion Hig hl ightsPrime Location in Delano Retail CorridorThe Property is located in Delano Village Shopping center along Cecil Avenue, a retail thoroughfare featuring national tenants such as
Walgreens, 99 Cent Only, True Value, O’Reilly Auto Parts, Starbucks and McDonald’s. California Route 99 is located 0.5 miles west of
the Property and Delano High School is located 0.5 miles east of the Property, providing exposure to the area’s major traffic drivers.
Densely-Populated Consumer BaseThere are over 21,000 residents within a one mile-radius of the Asset, offering excellent exposure to a densely-populated consumer
base in immediate proximity.
DEMOGRAPHICS
1-MILERADIUS
3-MILERADIUS
5-MILERADIUS
POPULATION
2023 Projection 22,607 47,166 57,423
2018 Estimate 21,900 45,711 55,936
2018 Number of Households 5,424 10,966 11,123
2018 - 2023 Projected Growth 3.2% 3.2% 2.7%
Age 0 - 14 28.3% 27.7% 22.9%
Age 15 - 24 17.3% 17.5% 18.0%
Age 25 - 44 27.4% 27.6% 32.6%
Age 45 - 64 18.4% 18.7% 19.1%
Age 65+ 8.6% 8.4% 7.2%
ESTIMATED HH INCOME
Less than $35,000 46.7% 43.3% 43.4%
$35,000 - $49,999 16.9% 16.2% 16.2%
$50,000 - $74,999 17.3% 17.8% 17.7%
$75,000 - $99,999 9.1% 10.0% 10.0%
More than $100,000 10.0% 12.7% 12.7%
Average Estimated HH Income $50,645 $53,956 $53,950
Median HH Income $37,162 $39,905 $39,878
Delano Marketplace
Delano Marketplace is a recently-delivered, major retail development in the city. The Super Regional Center meets the current
retail demand in the surrounding region, which includes several cities located within a 15-mile radius. The Delano Marketplace
adds to the local employment within the City of Delano as well as the northern Kern County region. With a total land area of 45
acres, the project boasts over 300,000 square feet of commercial retail, with a majority of the space designed for big box national
retailer anchors with a lifestyle shopping center that will feature a movie theatre, bowling alley and other community retail
amenities. The major retailers in the shopping center are Walmart and Ross Dress for Less.
Delano Marketplace served as a catalyst for future development in the Delano community. The Grapevine project is currently
underway, and includes a 328,500 square foot shopping center as well as a 432-unit multifamily community. This commercial
center will create 1,664 jobs and stimulate the local economy while the living community will draw a larger consumer base and
boost the local population.
8Smart & Final – Delano, CA
B a ke r s f i e l d , C A
As part of the metropolitan center of the Central Valley, Bakersfield serves primarily
as an agricultural and oil industry hub. Companies in those industries with
headquarters based in the Bakersfield MSA include Bolthouse Farms, Grimmway
Farms, Sun World and Area Energy. While agriculture and oil business continue to be
important elements in the local economy, Bakersfield’s economy has diversified to
include other industries including aerospace, mining, manufacturing, distribution and
food processing. The Bakersfield MSA ranks in the top 60 largest metropolitan areas
in the United States.
RETAIL MARKET STATISTICS(As of 2Q2018)
MARKET SUBMARKET
Bakersfield Kern County
# of Buildings 2,939 131
Total Inventory (SF) 31,546,065 1,032,213
Total Vacancy 5.6% 3.1%
YTD Net Absorption (SF) 292,090 58,910
Delano Retail Submarket
Delano has over one million square feet of retail, and the local retail market achieves a healthy and steadily declining
vacancy rate of 3.1%. Asking rents have gradually increased from $12 per square foot to $17 per square foot over the
past two years. Over 58,000 square feet of positive net absorption over the past year reflects the strong demand for
retail space in the Delano market.
The Asset’s proximity to California Route 99 and Delano High School creates an ideal market for national retailers with
convenient accessibility to the area’s largest traffic drivers. Positioned along Cecil Avenue’s retail thoroughfare,
numerous national retailers surround the Property and include: Walgreens, 99 Cent Only, True Value, O’Reilly Auto
Parts, Starbucks and McDonald’s.
Delano Marketplace
Delano Marketplace has had a substantial impact on the local retail market. The addition of major national
retailers such as Target, Walmart, Home Depot and Ross Dress for Less has led to the development of more
retail properties and multifamily communities. Grapevine Villa and The Vineyard are two major multifamily
developments currently underway in Delano, and these projects will add hundreds of multifamily homes, over
300,000 square feet of new retail and more than 1,600 jobs in the Delano community, ultimately stimulating the
local economy.
Source: CoStar
Delano Marketplace
62
https://www.jllproperty.us/net-lease/
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Irvine, CA 92614
Your Resource for Net Lease Investment Offerings
Primary Sales Contact:
JONES LANG LASALLE AMERICAS, INC.
The material in this Offering Memorandum is confidential, furnished solely for the purpose of considering the “AS IS” acquisition of 9305 Mission Gorge Road (the “Property” or “Asset”) located in the State of California. The information is not to be used for any other purpose or to be made available to any other person without theexpress written consent of Agent on behalf of Owner. The material is based, in part, upon information supplied by Owner and, in part, upon information obtained by Agent from sources they deem to be reliable. Summaries contained herein of any legal documents are not intended to be comprehensive statements of the terms of suchdocuments, but rather only outlines of some of the principal provisions contained therein. No warranty or representation, expressed or implied, is made by Owner, Agent or any of their respective related agents or entities as to the accuracy or completeness of the information contained herein. Prospective investors should make their owninvestigations, projections and conclusions regarding the Property. It is expected that prospective investors will conduct their own independent due diligence concerning the Asset, including such engineering and environmental inspections as they deem necessary to determine the condition of the Property and the existence or absence ofany potentially hazardous materials used in the construction or maintenance of the Asset. No representations, expressed or implied, are made as to the foregoing matters by the Owner, Agent or any of their respective officers, employees, affiliates and/or agents.
Jason Gribin+1 213 239 [email protected]
Adam Friedlander+1 949 296 [email protected]
Michael Bower+1 312 228 [email protected]
Analyst Support:
Secondary Sales Contact: