How to Find the Best NNN Walgreens Real Estate for Sale
Here’s How to Find the Best Walgreens Real Estate
Over the decades, Walgreens has become a drugstore industry leader since it’s company stock first went public in 1927. For the past 30 years, Walgreens net leased properties have also been proven real estate investments. Triple net investments, also called NNN, are properties where the tenant is responsible for the maintenance and expenses of the property. NNN Walgreens real estate is one tenant that trades in the triple net property sector.
NNN is loosely used by many brokers in marketing properties, however, triple net leases actually have a few different structures. Absolute net leases are the purest form of NNN leases, where the tenant is responsible for and pays directly all expenses and management of the property. Sometimes properties are referred to as NNN investments, but they really are double net (NN) leases. Under a NN property lease, the landlord can be responsible for roof, structure, or other maintenance aspects of the building. There also may be reimbursable expenses, such as taxes or insurance.
Walgreens properties, or other NNN assets, are marketed for sale on a number of websites including Costar, Loopnet, Crexi and on broker company listing webpages. It is important for a buyer to understand that if a broker is marketing a property for sale, that broker has the exclusive listing rights to market the property. This way the buyer understands that their broker is speaking with the selling broker that has direct communication with the seller.
Many of these listing marketplaces have a function to search by state or specific markets. With hundreds of NNN properties on the market at any given time, it’s most efficient for a buyer to narrow down their geographic preference. There are states that have no state income tax, which are preferred by certain NNN investors. Some investors also prefer specific geographic regions where they live or own other investments. Due to the low management required for NNN properties many investors will purchase nationwide, but will have preferences on population, household incomes, traffic, employment and other requirements specific to the market of the acquisition property.
What Makes the Best NNN Walgreens Real Estate?
Properties occupied by Walgreens, CVS and Rite Aid are all corporately run and there are no franchisee operators. Drugstores for the most part, including Walgreens for sale, all have corporate guaranteed leases making the rental income stream very secure. The value of drugstore properties is heavily tied to the corporate tenant occupying the building. There are a number of factors that can reassure a buyer that a drugstore tenant will continue to occupy the building: store sales, store hours, surrounding competition, and the state of which the drugstore is located.
Besides the quality of the real estate location, the main determination of value for drugstores is the lease type and firm lease term remaining before the options. Longer drugstore leases provide better sale value as they offer more guaranteed rent before the options and provide a buyer with better financing options. Drugstore leases that are absolute NNN versus NN trade at a premium, since there is a larger buyer pool for drugstores with no property management.
Price point and rent levels also play key roles in deciding if a drugstore investment is strong. Walgreens or CVS properties that have longer leases and are under $6,000,000 would have a larger buyer pool and better value, versus a $9,000,000 Walgreens or CVS with similar lease terms. Rite Aid properties not on the West Coast usually trade more often and at lower CAP rates, if they have price points under $3,000,000. For any drugstore acquisition, it is important for the buyer to understand what local market rent is compared to what the drugstore rent levels are. Buyers must make sure that the rent levels are replaceable, or close to being replaced in case the tenant decides to vacate the property and not renew their next option.
How Can A Broker Help Me?
Commercial real estate brokers that specialize in NNN investments are the best to work with when purchasing a NNN property. If a drugstore property is being considered for purchase, such as NNN Walgreens real estate, then it is best to make sure that the broker representing the buyer has previously sold a number of drugstore properties. Pharma Property Group (PPG) is a specialized brokerage firm focused exclusively on property sales occupied by Walgreens, CVS and Rite Aid. PPG has sold over 300 drugstores and underwritten over 1,000 drugstores in the last 10 years, and their experience allows them to assist buyers and sellers in the best possible way.
First time buyers of drugstore properties can build out a strong drugstore investment portfolio if working with a broker who, on the front end, evaluates their return requirements and expectations in relation to real estate quality, lease term, lease type and tenant financial strength. Depending on how many drugstores are going to be purchased over time, there should be a strategic acquisition plan to have a diversified mix of drugstore investments; as well as an understanding of what drugstore targets will be purchased first to anchor the overall portfolio.
Once an acquisition plan is put into place and there are clear buyer expectations, then a broker’s value comes in for sourcing potential drugstore acquisition opportunities. A seasoned broker will have both on- and off-market properties that are qualified and deliverable to send to a buyer. Brokers should also have relationships with other net leased brokers in order to provide their buying clients with full market coverage. Many sellers work exclusively with specific brokers. Buyers will want a broker who has a good reputation and ability to source not only their own pipeline of properties for sale, but also other competing brokers’ upcoming properties for sale.
Jason Pongsrikul, Managing Principal
Pharma Property Group
1979 Chicago Street
San Diego, CA 92110
www.pharmapropertygroup.com
Office: (858) 860-6591
