Maryland Walgreens Trades at Near 8% Cap

CHESTERTOWN, MD-A newly-constructed Walgreens here has traded for $7 million, at a 7.85% cap on current income. The seller is an LLC related to DMS Development of Towson, MD, while the buyer is 701 Washington Avenue LLC, which represents the interests of the New Jersey-based Tsavola family, according to Dean Zang in the Philadelphia office of Marcus & Millichap.

Zang and and Mark Taylor represented the seller, while Lori Schneider of Marcus & Millichap’s Fort Lauderdale office procured the buyer. Ramon Kochavi, broker of record in Maryland for Marcus & Millichap assisted with the transaction.

Newly-constructed after being relocated from a former Happy Harry’s location one mile away, the Walgreens--located at Washington Avenue and Morgenec Road--commenced rent in August 2009 on a new 25-year absolute net lease. Walgreens has made architectural upgrades to the exterior so it blends in with the small town storefronts--a requirement of the town. The location was what sold the purchaser, which had been seeking an investment specifically on Maryland’s Eastern shore, Zang says. Others buyers had dismissed the location because of the thin population density. But pairing the right asset with the right buyer resulted in a strong cap rate.

Taylor and Zang are marketing 10 CVS pharmacy and Walgreens pharmacy locations nationwide, and have five other drugstore locations under contract for sale. Leaving aside the local issues with this sale, Zang tells GlobeSt.com that net lease property sales in general are improving--and more buyers are entering the market. "I think investors have concluded now is a good time to get off the sidelines." Zang adds that the buyer profiles are a little different than from two years ago, when 1031 exchanges scooped up many of these assets. "Now we are seeing more buyers that are either funds or individual investors that are moving their dollars into real estate because there are safe yields and better alternatives than CODs, for example." That, in fact, was the motivation of this particular buyer, he says.