Cedrik Lachance's bottoms-up allocation: retail is being repriced property by property, not sector by sector

On February 15, 2022, after a hearing that ran past three hours, the Hermosa Beach Planning Commission voted unanimously to deny a Starbucks drive-thru at 204 Pacific Coast Highway. On March 1, 2024, the Palm Springs City Council voted 4-1 to deny a drive-thru-only Starbucks at North Palm Canyon Drive and Racquet Club Road. Same brand. Same state. A sector analyst would file both under one heading, and they died of completely different causes.

Cedrik Lachance would not find that surprising, because his whole career is a bet against the single heading. Lachance is Director of Research at Green Street, where he has spent two decades and now leads roughly 80 analysts producing the firm's 10 annual investment themes and coverage of more than 160 public companies. He has won the Wall Street Journal's "Best on the Street" award in real estate and advises Nareit's board, PREA, and EPRA. Green Street's house method, the thing Lachance actually sells, is bottoms-up: value the specific property, then the company, then maybe the sector, in that order, because the sector average is just an abstraction stretched over thousands of assets that do not behave alike. "Retail is dying" and "retail is fine" are both sector calls. Neither would have told you anything true about either of these corners.

In Hermosa Beach the lot was the verdict

The Hermosa proposal would have been the fourth Starbucks in town, and it needed a conditional use permit for the drive-thru element. Residents organized before the commission ever convened, voicing opposition at a February 9, 2022 pre-hearing built around two documented grounds, Climate Action Plan policy and traffic safety, and pointing out that the city already had three Starbucks locations operating without drive-thrus. The finding at the center of the unanimous denial, though, was geometric. The drive-thru lane came in at 24 feet of width, a dimension set by the lot itself, and the commission found it created a passing conflict with vehicles entering the main parking lot, a conflict the record says could not be fixed through design. The city's Climate Action Plan supplied a second, independent ground, with drive-thru idling read as a direct conflict with the city's greenhouse-gas reduction goals. Not one public voice supported the drive-thru element across a three-hour hearing. Commission chair Marie Rice made the boundary of the decision explicit: a Starbucks without the drive-thru could be permitted at the location. Starbucks did not appeal, and the corner remains available for a coffee shop that does not need a lane.

Twenty-four feet killed the deal.

In Palm Springs the general plan was the verdict

The Palm Springs application made the opposite mistake, format instead of geometry. It was drive-thru-only, no pedestrian entrance, no bicycle access, in a context the city's general plan had already marked for pedestrian-friendly gathering spaces. The Sustainability Commission voted unanimously to recommend rejection, reasoning that a format designed around vehicle idling conflicts with the greenhouse-gas goals written into the general plan. Mayor Jeffrey Bernstein, quoted by the Palm Springs Post, put the rationale on the record: "Looking at the objective of the general plan, we want this future neighborhood to attract [businesses] that will be more of gathering spaces and be more pedestrian-friendly." The lone dissent, Councilmember Lisa Middleton, was procedural rather than pro-applicant; she argued the city should set drive-thru policy citywide instead of case by case. Our file scores the site 22/100 and flags the part that should worry every operator in the market: a denial grounded in the general plan is reusable, and it now sits waiting for the next drive-thru application in the same zoning context.

One denial was a fact about a parcel. The other was a fact about a jurisdiction.

What bottoms-up means when the asset is a drive-thru

Run the Lachance method against these two files and the discipline becomes concrete. A sector call prices both corners identically, some QSR-retail cap rate adjusted for California. An asset-level read prices them nothing alike. The Hermosa risk lived in a site survey, a 24-foot dimension discoverable before an application was ever drafted, and it was fatal in a way no concession package could touch. The Palm Springs risk lived in two public documents, a general plan and a sustainability commission's posture, and it was format-contingent; the case file's own read is that a mixed concept with a pedestrian entrance would have at least answered the gathering-space critique that decided the vote. One risk was immutable. The other was a design choice.

That distinction is worth real money, and averaging it away is how portfolios end up paying entitlement tuition twice for lessons the record had already published. The bottoms-up shop reads the lot geometry and the operative planning documents before the LOI, then lets the sector narrative argue with someone else.

Middleton's dissent is my tell for what comes next. My bet: Palm Springs adopts a citywide drive-thru ordinance before the end of 2027, converting a case-by-case denial pattern into standing law, and the operators who treated the March 2024 vote as one bad night at council will discover it was the drafting session. If that ordinance never materializes, my read of the precedent overweighted one councilmember's framing, and you should say so loudly. Either way, price the parcel, then the jurisdiction, and only then the sector, because the sector never once showed up to a hearing.

This analysis is a source-cited research summary drawn from public records and industry reporting, not legal advice. It can contain errors and should be verified independently before any investment decision.