Michelle Napoli is editor of Net Lease forum, from which this article is excerpted.

Woonsocket, RI—The nearly $1.28-billion securitization of 340 CVS Corp. drugstore properties closed on Dec. 11, 2006, according to information from Moody's Investors Service. The $1.3-billion sale-leaseback of assets, either owned or ground leased and spread among 29 states that resulted in the 144A securities offering, is believed to be the largest retail sale-leaseback in US history. The loans backing CVS Lease-Backed Pass-Through Certificates Series 2006 mature in December 2028.

Woonsocket, RI-based CVS was represented in the deal by Boston law firm Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC. Andrew Urban, the firm's co-managing member and CVS relationship manager, tells NET LEASE forum, "This is the largest retail sale-leaseback in U.S. history, by some margin," adding that he believes the next largest was approximately $800 million in size.

Urban notes that drugstore properties acquired through CVS's purchase of part of the former Albertsons business "formed a significant portion of this transaction." Indeed, work on the transaction went on "for quite a while," he says, starting in anticipation of that Alberstons portfolio acquisition. Such a sale-leaseback is typical for his client's real estate strategy, he says.

According to Urban, affiliates of Dallas-based the Staubach Co. were the equity investors that purchased the properties via sale-leaseback and arranged debt financing through Lehman Brothers Inc., which led the offering's underwriting by a number of investment banks. Attempts to interview representatives of CVS, Lehman and Staubach were unsuccessful by deadline.

According to Moody's, the deal's underwriters were: Lehman Brothers, KeyBanc Capital Markets, Mizuho International PLC, BNY Capital Markets Inc., Banc of America Securities LLC, Credit Suisse First Boston LLC, Suntrust Capital Markets Inc. and LaSalle Financial Services Inc.

Instant Insights /

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