New National Cap Rate Established in Walgreens Sale
Colliers Achieves Record-Setting 4% Cap Rate in Thousand Oaks Walgreens Transaction
In what brokerage officials are hailing as a watershed transaction, Colliers International has established a new national record for capitalization rates in the recent $15.675 million sale of a single-tenant Walgreen’s Drug Store location in Thousand Oaks, Calif. The record cap rate was a flat 4 percent.
A private investor acquired both the land and building that is occupied by one of the pharmaceutical giant’s several retail outlets located in the suburban and affluent Conejo Valley, which includes the City of Thousand Oaks, and lies about 50 miles north of downtown Los Angeles in Ventura County. The seller was the development firm of NewMark Merrill Companies based in Los Angeles.
“This was a fee simple sale of an existing building and pad occupied solely by Walgreen’s and a real breakthrough in terms of the cap rate, especially at this price point,” said Colliers Senior Vice President Eric Carlton who, along with Executive Vice President Jereme Snyder, represented the seller. “We have not found a comparable Walgreen’s sale with a lower cap rate anywhere in the nation.”
The Snyder/Carlton Team had to orchestrate all parts of the complex transaction with a looming 1031 exchange deadline that would have resulted, had they missed it, in the buyer facing a large capital gains tax bill. Other details working in their favor were the long-term NNN lease in place on the property that has 19 years left on its term with scheduled rent increases of 10% every 10 years and options to extend the lease.
“In addition to the record cap rate, this transaction was made all the more valuable because this was a fee simple lease (land and building) in place with scheduled rent escalations, something rarely seen in the sales of single-tenant Walgreens retail locations,” said Snyder. :The fact that the buyer also had a very large exchange requirement and was bringing all-cash to the transaction worked in their favor to meet the buyer’s need to quickly close the transaction.”
Additionally, when reviewing the transaction’s finer details, other considerations that stood out to Carlton, Snyder and the investor included the dominant location of the property at 550 N. Ventu Park Road, with the closest Walgreens some 13 miles distant.
“Despite a very tight deadline, the timing was right for both buyer and seller, the credit strength of the buyer was obvious, and size of the deal fulfilled the buyer’s exchange portfolio obligation, all of which created a perfect scenario for us to complete this transaction in such a short period,” Carlton added.
The property also benefits by being located on an outparcel of a newly developed shopping center anchored by a Walmart Neighborhood Market, a Chase Bank location and new Hampton Inn. It is also adjacent to one of the most heavily-trafficked freeways in California, the Ventura Freeway (US 101), running between downtown Los Angeles and San Francisco.