LOUISVILLE—Although many investors in single tenant net lease properties focus on core markets, the lure of a property with a great brand name, even if it is outside a core area, can also be powerful. And investors find few sectors as appealing as drug stores.
Quantum Real Estate Advisors, Inc., for example, has just brokered the sale of a freestanding Walgreens in Louisville for nearly $7.8 million. The property has a long-term lease with over 24 years remaining. The seller was a Louisville-based developer and the buyer was a private individual based in New York. Jordan Kaufman, executive vice president and Dan Waszak, senior vice president at Quantum represented the buyer.
“Investors are attracted to these properties partly because they are one of the few opportunities with tenants that sign leases of 20 years or more,” Randy Blankstein, president of the Boulder Group, a net lease firm in suburban Chicago, tells GlobeSt.com.
“And most people believe that pharmacies will always do well, especially since, unlike a lot of other retail, pharmacies are resistant to internet competition.”
Boulder recently released a study that shows cap rates for top drug store brands like Walgreens have fallen to historic lows since the third quarter of last year.
“This sale represented the first of three acquisitions by our client in order to fulfill a 1031 requirement,” says Kaufman. “The buyer was able to find a property that benefitted from an excellent location and long term lease.”
“We were able to structure the deal in a way that maximized cash flow as well as matched the appropriate debt and equity required for this portion of his 1031,” says Waszak. “Since his relinquished property sales included several highly-levered zero cash flow properties, it was critical to replace a significant amount of debt.”