4 unit CVS Commercial Real Estate Package

8 Replies

I have been analyzing deals and just found a 4 unit CVS portfolio in 4 different states for sale at 12.3 mil. 27% down at a 6.47 cap rate. The NOI is 800,000. Correct me if I'm wrong but that should come out to 66k a month? P&I should come out to 48k a month. I am assuming the lease is a triple net. Anyways, I was curious is this analysis accurate or am I way off? I appreciate any and all criticism/tips. Thank you ladies and gentlemen. Let me know if you want some more info!

Well yea, math is math. But, I have no experience with these, key items would be lease terms/expirations, termination clauses, etc. These would be difficult to rent if ever empty.

Originally posted by @Michael @Emery Jensen :

I have been analyzing deals and just found a 4 unit CVS portfolio in 4 different states for sale at 12.3 mil. 27% down at a 6.47 cap rate. The NOI is 800,000. Correct me if I'm wrong but that should come out to 66k a month? P&I should come out to 48k a month. I am assuming the lease is a triple net. Anyways, I was curious is this analysis accurate or am I way off? I appreciate any and all criticism/tips. Thank you ladies and gentlemen. Let me know if you want some more info!

Debt service is probably off if your looking at an amortized loan. You May me able to get it close with IO loan. 

On these NNN deals, READ THE LEASE. You're paying a premium on a $/SqFt basis and usually, CVS writes its own lease. YOU ARE MAINLY BUYING A LEASE AND ASSOCIATED CASH FLOWS.

This may mean easier outs and rent holidays down the line.  If you don't have a comm broker or you don't understand comm leases, do not trust the listing broker.

As far as CapRate, I guess once you understand the T&Cs, the lease is what it is since it's in existence.  You can accept it, but how does it compare to other similar properties?

CVS is trading at a premium, @Joel should chime in as he does NNN free standing all day.

Its a very specific product for specific buyers, not always cash flowing, but more debt service or pay cash and mailbox money.

Also, READ THE LEASE haha

@Ronald Rohde Thanks for the advice! 

Just another question I would like to throw out there, what are the standard terms for a commercial loan, and is a balloon payment typical? I ask this because a calculator I have been using includes this calculation. 

I think you’re off on the term.  The most I’m seeing is 25 years and in 95% of the cases I’m seeing 20 years.

Plus, if you're using a 5/30 73% LTV at (I'm guessing) 4.5% (as you'll be buying as a non-personal entity) your ROE 7.52%. with a 25 year term you'll be at 5.93% ROE.

Unless you love CVS, and don’t care that Amazon just started a pharmacy, you can probably do better.

Emery,

Are you trying to purchase for yourself? Are you just trying to learn about the NNN space as an agent?

If you are trying to buy yourself with limited knowledge of NNN then usually best to work with someone with experience to help guide the path and avoid the pitfalls.

If you are wanting to learn the space as an agent then this is not something you do on the side when clients are putting down millions of dollars or more. Instead it is typically best to work at a commercial brokerage that specializes in NNN on a team and get trained up over time. Eventually if you do a good job then most agents move up to higher positions and better splits. Some go out after so many years and open their own NNN brokerage.

CVS can have rent holidays and a ton of other metrics. The debt available depends on a ton of factors with primary lease term, area, demographics, strength of the borrower, etc.

I am not worried about Amazon getting into the healthcare space. Wal-mart has already started turning excess front sidewalk space into a medical center by doing a bump out to their building. I have also seen Walgreens and CVS where they used to have a small 2 room section with a nurse for medical. Now they have expanded pharmacy bigger and have made about 1/3 rd the size of the store medical now. Pharmacy already has a lot of the best corner spots Amazon would want. If anything when renewal comes up and Walgreens or CVS makes demands the landlord for certain locations can have leverage if competitors come calling.

I check back in here now every week or so but have been busy non-stop with clients and NNN. There is huge demand for it. Buyers want to go into fixed assets with long term predictable leases with essential business type investment grade tenants. Retail centers are hard to finance and out for the most part unless say a 3 to 4 top at street level with large back anchor behind it. The ones with a bunch of mom and pop tenants just are not worth the headache for the yield at least for me. A few clients are waiting to see if the Republicans take the Senate again with the January runoffs here in GA. That outcome may make the next 4 year planning more clear how they will allocate investments.