Walgreens in Lakemoor

CHICAGO—As reported in GlobeSt.com, even though many types of single tenant net leased properties have attracted interest from investors, sending cap rates on a long-term plunge, name brand drug stores, especially Walgreens, draw more attention. The Boulder Group, a net leased investment brokerage firm in suburban Chicago, for example, has completed the sale of a recently constructed single tenant triple net leased Walgreens property located at 28895 West Highway 120 in Lakemoor, IL, for $6,725,000. The seller was a Midwest based developer and the buyer was a private investor in a 1031 exchange.

“While most investors are attracted to Walgreens properties, investors in 1031 exchanges have been amongst the most successful in purchasing these properties because of the premium that they are willing to pay,” says Jimmy Goodman, a partner of Boulder.

Cap rates for both Walgreens and CVS properties reached their historic low in the first quarter of 2014, according to Boulder’s report on name brand stores. Cap rates for Walgreens properties compressed by 15 bps from the third quarter of 2013 to the first quarter of 2014.

“Part of the compression can be attributed to the significant decline of 9% in the supply of drug store properties currently being marketed,” according to the new report. The Walgreens rate stands at 5.6%, with CVS at 5.9% and Rite Aid at 7.75%.

Lakemoor is a far north suburb of Chicago that straddles Lake and McHenry counties that has doubled its population since 2000. Walgreens is the only occupant of the 14,820-square-foot retail building that was completed in October 2013. The property sits along the primary east-west roadway in the area. The lease has 25 years remaining, making it even more attractive to investors.

“The market for Walgreens properties remains active as investors are attracted to investment grade rated companies with long term leases,” says Randy Blankstein, president of Boulder.