Calling any investor that are partnered with Walgreens

8 Replies

So Walgreens is one of the best retirement plans there is if you ask me . They simply take care of everything and the tax benefits are amazing!

Walgreens finds the locations

 Walgreens Build the store ,Gets everything up and running .

Then sales to a experienced investor . 

Once the sale goes through, Walgreens then leases the location right back from the investor on a guaranteed 30-year lease.

Walgreens handles all of the management and expenses!...All the investor has to do every month is pay the mortgage and that's all taken care of by simply auto-pay and auto draft. 

The awesome thing is ,Walgreens has amazing Credit. So  banks will definitely be happy Lending you the money to buy a property that has a guaranteed 30-year lease by one of the largest retail stores in the world.   Talk about easy money . Most of us start with single-family homes for rental property which is the stage that I am in  now . In a couple of years I plan to trade all of my single family homes for larger multifamily because we all know that multifamily is much easier to run and also produces more Cashflow. SO trading your single family rental property for apartment buildings is a no-brainer . apartment buildings are still a lot of work to keep up with even though you have your management systems in place . 

So Walgreens is a hassle free Gateway to the good life after years of investing as accredited investor . 

Let's hear some positive stores from the guys that have done a similar investment plan or investor planning to do a similar strategy . 

I assume you refer to NNN leases.

What kind of a cap rate do you see on these deals and what are typical loan terms?

What is the exit strategy?

I agree!  It’s tough not to love a pure net lease to an investment grade tenant who typically pays above market rents and signs 30-40 year leases with another 20+ in options.  What’s not to love?   Well...

First, the leases do not typically have annual bumps, track market rates or inflate consistent with CPI.  So there’s a rent trap waiting a few decades down the road.  No problem if you’re in and out on the first 10, but buying one with an older lease can get tricky quickly.

Second, the financing you’re getting from the bank will seldom lock In your interest rate more more than 3-5 years.  So, if/when rates rise, you can possibly get stuck in a flat rental rate that won’t cash flow.  Plus, you can’t get out of or resell the thing without a discount and much higher cap rate. 

Lastly, I’ve seen a small number of leases with little quirks like termination options in the second or third decade, purchase and redevelopment options, or just things that get buried in fine print.

So would I buy one?  Absolutely, but not without clearly understanding the entire lease agreement and downsides.  Then, we can talk about the cap rate.

Originally posted by @Nick B. :

I assume you refer to NNN leases.

What kind of a cap rate do you see on these deals and what are typical loan terms?

What is the exit strategy?

 I've seen cap rates in the past between 5 and 6 . 

I'll just add, there are a good number of different retail NNN investment options out there and they each have strengths and weaknesses. You'll usually find them if you carefully read the lease and understand the underlying tenant credit. I don't trust broker pitches or promised returns because I've seen too many that were just wrong. The numbers are based on the lease and I've seen all sorts of owner responsibilities in "pure" net leases. you need to run your own numbers, with the agreed lease in hand.

If you don't want to go through all that and want a safer no brainer NNN, just buy ground leases. I love to participate in those.

Most current cap rates for NNN RE can be found here.

https://www.bouldergroup.com/research.html

any update on this? I have acquired prime ground and looking for a NNN scenario. I have been advised to use a well-known developer who seems to want to charge 3-5% and wants to plan out 16k sft and hire the right leasing agents and get tenants secure loans etc and execute the project

There are lots of STNL assets out there that provide the same type of income for retirement. What you're describing is fairly common. Pharmacies are decent but a few of the downfalls have already been noted here... One not mentioned is that a pharmacy deal can easily price most ma and pa investors out. A pharmacy with substantial term could be anywhere from 6 to 17 million dollars. You can very easily find other investment grade STNL assets with 7 Eleven (4.25 - 4.5 CAP), McDonald's (4.5-5 CAP), Starbucks (5-5.25 CAP) and something like AutoZone (6 CAP) with substantial term (15-20 years plus options) for less than 5 million dollars.

I would be happy to jump on the phone with anyone to discuss their possible investment in these types of assets. We represent 3 out of 4 of the above Tenants (not AutoZone) and lots of their preferred developers here in WA state and have a few NNN and Absolute Net investments coming down the pike!

@Ty Ottaberry

I know from operating expenses their rent goes down as time goes on. It may seem strange but I know of 2 location who's rent was reduced about 10k 10 years after the location opened up.

This may or may not be a regional pricing strategy due to higher costs in the NY areas.

1 location that has been closed for the past 5 years still has the banner up and still paying the rent.