Despite the persistent higher interest rate environment, SRS has noted that the absorption of 7-Eleven assets continues to outpace comparable credit tenants such as drug stores and coffee brands.
Consistently SRS has seen over the last 12 months that cap rates for 7-Eleven stores have held steady. Moreover, across all transactions, the CRE agency has not seen values erode or cap rates rise as much for this well-known C-store brand.
Over the past 18 months, the firm sold a total of 33 properties occupied by 7-Eleven valued at $242 million with an average cap rate of 5.27%. The transaction performance has been consistent across the nation including assets sold in California, Colorado, Connecticut Florida, Nevada, New York, New Jersey, North Carolina, South Carolina, Oklahoma, Tennessee, and Texas. Also, there are additional properties on the market in California, Florida, New Jersey, North Carolina, South Carolina, Tennessee, and Texas. All the assets are single-tenant properties with 12 or more years remaining on the lease term.
Let’s investigate this C-store brand’s success. Founded in 1927, 7-Eleven is the world’s largest convenience retailer and is a global brand with more stores than any other retailer in the world – more than 84,000 across 20 countries, according to the company. Earnings in 2023 were reported at $2 billion.
For each of these transactions, SRS found that for investors looking to maximize the benefits of bonus depreciation and mitigate taxes, 7-Eleven offers the best credit for net lease tenants across the C-store and car wash sector. SRS believes that the firm has maintained transaction activity in the market because of the best-in-class credit that 7-Eleven provides and the benefits of bonus depreciation.
There is an interesting juxtaposition between the slowdown of new store deliveries for 7-Eleven’s meeting with the constant need to offset ordinary income via depreciation, which has created a net effect of slightly compressing cap rates at a time when the broader NNN market has materially softened. Ultimately, investors benefit from the long-term stability, high-traffic locations and strong credit rating of this internationally recognized chain.
Patrick Nutt is Executive Vice President and Managing Principal of SRS.