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5/14/12
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By Allen Wolfsheimer
Single-tenant Walgreens properties continue to fetch big dollars from buyers looking to invest in secure NNN-leased assets. We’ve got two very noteworthy recent Walgreens sales to report, including a record-breaking deal on the Las Vegas Strip that went for over $1,700 per sf. The other property was in Silicon Valley and traded for over $700/sf.
In Vegas, a 16k sf Walgreens drugstore on the Strip sold for $27.8 mil, or $1,736 per square foot, making this the most valuable single-tenant drugstore ever to trade in the United States, according to Marcus & Millichap. The Walgreens drugstore is located at 3025 South Las Vegas Blvd, where it offers terrific frontage on one of the world’s best-known and most heavily traveled boulevards.
The property is two blocks from the Las Vegas Convention Center, less than one-quarter mile north of the Encore at Wynn Las Vegas hotel and less than one quarter-mile south of the historic Circus Circus Hotel and Casino. Built in 2001 on 1.61 acres, this Walgreens is open 24 hours per day.
Ray Germain, a net-leased property investment specialist in Marcus & Millichap’s Las Vegas office, represented the seller, a local real estate investment partnership. Sean Shahar Ziv, an associate in the firm’s San Diego office, repped the buyer, a foreign fund.
Marcus & Millichap tells us that similar pricing hasn’t been achieved since January 2005, the height of the commercial real estate “boom,” when a $19.5 mil drugstore traded in Miami. The only comparable transaction closed approximately nine months ago in August 2011 when a drugstore in Fort Myers, FL commanded $1,466 per square foot, according to CoStar.
“Investors will continue to pay premiums for exceptionally located net-leased properties given the scarcity of quality assets on the market,” says Germain. “We received multiple qualified offers from all types of investors around the world for this property,” he notes.
Walgreens was in the 11th year of a 20-year triple-net lease at this location, and prior to the close of escrow they agreed to an extension for an additional 10 years, demonstrating the company’s long-term commitment to the location and increasing the overall desirability of the asset. Germain points out that the lease structure is rare for Walgreens in that it provides for 10 percent rent increases every 10 years in addition to a percentage rent clause.
Walgreens has repeatedly demonstrated its dedication to the submarket by opening three additional Las Vegas Boulevard stores with the latest opening on the South end of the Strip in February 2012.
Meanwhile, in the Silicon Valley city of Sunnyvale, a private investor paid $10.05 mil for a 14.8k sf single-tenant property NNN-leased to Walgreens. It was sold by Sand Hill Property Company.
Located at 780 East El Camino Real, the Walgreens is positioned between E. Remington Dr/S. Fair Oaks Ave and S. Wolfe Rd in the heart of Silicon Valley. The freestanding building was developed by Sand Hill Property Company in 2008 for Walgreens, which inked a rare 75-year triple net (NNN) lease with 10% rent increases every 10 years.
The property has signalized access and includes a drive-thru pharmacy. Neighboring tenants include Best Buy, PetSmart and Panda Express. Jocelyn Jamias with Cassidy Turley represented the buyer, who was fulfilling the upleg in a 1031 Exchange transaction.
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