October 16, 2015by The Boulder Group
Northbrook, IL – October 16, 2015 – (RealEstateRama) — The Boulder Group, a net leased investment brokerage firm, has completed the sale of a single tenant triple net leased CVS property located at 5920 West Park Boulevard in Plano, Texas for $10,202,589. This trophy property was sold at a 4.82% cap rate which is the lowest cap rate for a drug store property sold in 2015 outside of California according to Real Capital Analytics.
The 13,146 square foot CVS building is located in Plano, an affluent northern suburb of Dallas. The property is strategically located at the heavily trafficked signalized intersection of West Park Boulevard and Parkwood Boulevard. This signalized intersection experiences traffic volumes of approximately 50,000 vehicles per day. Additionally, the property is benefited by its proximity to the North Dallas Tollway. There are approximately 300,000 people living within a five mile radius of the property earning average annual household incomes in excess of $108,000.
The CVS is situated in a vibrant retail corridor which features Costco, Walmart Supercenter, SuperTarget, Home Depot and the Willow Bend Mall (which is anchored by Neiman Marcus, Macy’s, Dillard’s & Apple). Further contributing to the strength of this retail corridor is the presence of Ikea which is located approximately five miles north of the property.
Randy Blankstein and Jimmy Goodman of The Boulder Group represented the seller in the transaction; a Midwest based private partnership. The purchaser was a high net worth individual in a 1031 Exchange.
There are approximately 21 years remaining on the absolute triple net CVS lease. The lease features a 5% rental escalation in each of the six 5-year renewal option periods. CVS is an investment grade rated tenant (S&P: BBB+) and is publicly traded with a market capitalization in excess of $113 billion.
“The property’s superior location within a core market allowed The Boulder Group to achieve a historic cap rate for this sale” said Randy Blankstein, President of The Boulder Group. Jimmy Goodman, Partner of The Boulder Group, added, “While single tenant properties are selling in all types of locations; core markets, like Dallas, are at the forefront of investor demand.”
About The Boulder Group
The Boulder Group is a boutique investment real estate service firm specializing in single tenant net lease properties. The firm provides a full range of brokerage, advisory, and financing services nationwide to a substantial and diversified client base, which includes high net worth individuals, developers, REITs, partnerships and institutional investment funds. Founded in 1997, the firm has arranged the acquisition and disposition of over $2.4 billion of single tenant net lease real estate transactions. From 2010-2014, the firm was ranked in the top 10 companies in the nation for single tenant retail transactions by Real Capital Analytics. The Boulder Group is headquartered in suburban Chicago.
www.bouldergroup.comThe Walgreen Company (Walgreens) is an American pharmacy company, it is the largest[5] drug retailing chain in the United States. As of May 31, 2014, the company operated 8,217 stores in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. It was founded in Chicago, Illinois, in 1901. The Walgreens headquarters office is in the Chicago suburb of Deerfield, Illinois.
In 2014, the company agreed to purchase the remaining 55% of Switzerland-based Alliance Boots that it did not already own to form a global business. Under the terms of the purchase, the two companies merged to form a new holding company, Walgreens Boots Alliance Inc., on December 31, 2014. Walgreens became a subsidiary of the new company, which retains its Deerfield headquarters and trades on the Nasdaq under the symbol WBA .[6]OCTOBER 27, 2015
Cap rates for single tenant CVS, Rite Aid and Walgreens properties reached a new historic low in the net lease drug store sector in the third quarter of 2015.
Cap rates continued to decline as investors flock to the net lease space’s cornerstone asset, drug stores. With historically low cap rates, the drug store property supply has increased drastically by over 20% as owners attempt to take advantage of unprecedented high values. While overall cap rate levels experienced compression, short term leased Rite Aid properties with 5-9 years of lease term remaining had the greatest cap rate compression of 85 basis points in the third quarter of 2015. New construction CVS properties experienced the second greatest compression of 50 basis points to a 5% cap rate, the same level for new construction Walgreens assets. These levels can be attributed to the historically low interest rate environment coupled with high demand amongst 1031 exchange buyers for long term leased properties in a market constrained by limited expansion plans for drug stores tenants.
With cap rates for Walgreens and CVS at all-time low levels, the ratio of long term leased drug store properties (20 years or more) to the total supply has decreased when compared to the third quarter of 2014 and total overall supply of long term leased drug stores declined by 27% in the same time period.
As Rite Aid’s financial strength improves, investors have gained interest in the extra yield associated with Rite Aid properties. The additional yield is attributed to Rite Aid not being an investment grade rated company similar to Walgreens or CVS. However, with improving company fundamentals, cap rates for Rite Aid properties decreased by 77 basis points since the third quarter of 2014.
Transaction velocity for 2016 in the net lease drug store sector should remain at a similar pace to 2015 as drug stores continue to be at the forefront of investor demand. As cap rates for new construction properties with long term leases continue to compress, expect 1031 exchange buyers and private investors to remain the primary buyer. It has become increasingly difficult for institutional investors to acquire long term leased drug stores due to the low cap rates associated with these properties. Additionally, investors searching for higher yields for drug store properties will seek short term leased assets with strong store sales.
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Rite Aid is an American pharmacy and drugstore chain, it is a Fortune 500 company and is headquartered in East Pennsboro Township, Cumberland County, Pennsylvania, near Camp Hill.[2][3] Rite Aid is the largest drugstore chain on the East Coast and the third largest drugstore chain in the U.S.
Rite Aid began in 1962 as a single store opened in Scranton, Pennsylvania called Thrift D Discount Center. After several years of growth, Rite Aid adopted its current name and debuted as a public company in 1968. Today, Rite Aid is publicly traded on the New York Stock Exchange under the ticker RAD. Rite Aid reported total sales of US$ 25.5 billion in fiscal year 2014. In 2008, its market capitalization dropped to under $500 million. As of 6 February 2015, the market capitalization of Rite Aid was about $7.15 billion.[4] Its major competitors are CVS and Walgreens. Walgreens announced on October 27, 2015 that it would acquire Rite Aid for $17.4 billion pending approval.[5]
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