At the forefront of investor demand

CHICAGO—Developers have transformed the look of many Walgreens stores in the nation’s top markets, introducing a sleeker, more modern design. And with single tenant triple net leased properties attracting historic levels of investor interest, it’s perhaps no surprise these properties can sell at historically low cap rates.

The Boulder Group, a net leased investment brokerage firm based in suburban Chicago, for example, has just completed the sale of a single tenant triple net leased Walgreens at 6121 N. Broadway St. in Chicago, Illinois for $13,025,000. The property was sold at a 4.87% cap rate, the lowest cap rate ever recorded for a Walgreens property according to Real Capital Analytics, a New York City-based research firm.

“It’s a combination of its urban core location and that it’s new construction,” says Randy Blankstein, president of Boulder. The firm did field eight offers on the property, “but most of them couldn’t get to this pricing level.” RCA found that two other Walgreens in the past year also sold at a cap rate under 5.0%, he adds.

Walgreens occupies the entire 14,820-square-foot building, which was developed by Crossroads Development Partners in 2013 in a dense infill area of Chicago on the northeast corner of N. Broadway St. and W. Glenlake Ave. This build-to-suit Walgreens replaces an older in-line store located on the same site under a 35-year lease that was set to expire in August 2015. The new lease has over 24 years remaining with fifty years of renewal options.

“This project, which I began pursuing in 2004, is a success for all parties and is the result of a collaboration among many stakeholders including Walgreens, Mid-America Real Estate Corp., Ald. Harry Osterman and the Edgewater community,” says Michael Nortman, president of Crossroads.

Blankstein and Jimmy Goodman, a partner of Boulder, represented Crossroads in the transaction. The buyer was a Massachusetts-based limited partnership in a 1031 exchange.

“While single tenant properties are selling in all types of locations,” says Goodman, “core markets, like Chicago, are at the forefront of investor demand.”