What San Diego Buyers Are Seeking in Triple-Net Assets

Fryman: “Unlike apartment communities, the absolute triple-net lease offers zero landlord responsibilities since the tenant is responsible for the costs of real estate taxes, property insurance and maintenance in addition to rent.”

OCEANSIDE, CA—The second Walgreens to trade in San Diego County in the last year represents buyers’ appetite for single-tenant retail assets with long-term leases and national tenants in good areas, Hanley Investment Group EVP Kevin Fryman tells GlobeSt.com. HIG recently arranged the sale of a single-tenant absolute net-lease Walgreens property at 3507 Cannon Rd. here. The purchase price was $7.4 million, which represented a cap rate of 5%. Fryman, along with Ed Hanley, president of HIG, represented the seller, a private investor based in Beverly Hills, CA. The buyer, a private investor from Northridge, CA, was represented by Jason Flashman/Flashman Investment Group of Peak Commercial of Los Angeles. The sale represents only the second Walgreens to trade in San Diego County in the last 12 months.

“According to CoStar, only eight Walgreens with more than 10 years remaining on their initial lease have sold in California in the last 12 months for an average cap rate of 5.35%, compared to 13 transactions in the 12 months prior to that for an average cap rate of 5.03%,” says Hanley. “A single-tenant investment such as Walgreens provides long-term cash flow with relatively low risk. As investors continue to look for security, we expect that the demand for these high-quality single-tenant investments will remain strong through 2017.”