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8/04/17
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A Korean investment fund based out of Los Angeles purchased a 37k sf Walgreens flagship store in Honolulu for $42.25 mil ($1,142/sf). The asset, situated directly across from the Ala Moana Center, the largest open-air shopping complex in the world, sold for a 4.73% cap rate.
The property was sold by an entity affiliated with both Los Angeles-based Salem Partners and Wayne, PA-based Argosy Real Estate Partners. The deal is one of the largest single-tenant, net-leased pharmacy transactions on record in the U.S., we’re told.
The two-level, glass-enclosed Walgreens is the winner of several national and international architectural competitions, including a prestigious VIVA Award in 2016 in the Retail Store category from the International Council of Shopping Centers (ICSC). It is located at 1488 Kapiolani Blvd in Honolulu.
The Salem Partners/Argosy-affiliated entity had purchased the property from Walgreens in November 2015 as part of sale-leaseback transaction. As part of the original purchase transaction, the Salem Partners/Argosy-affiliated entity also acquired the adjacent parking structure and office building and currently is pursuing entitlements to develop two new high-rise, mixed-use towers.
A Colliers International team that included Tom Lagos and Michael Asarch represented the buyer in the transaction. According to Colliers, the Walgreens property was set to be the up-leg part a 1031 Exchange transaction involving the sale of a $26 mil, grocery-anchored, CA shopping center known as Hacienda Plaza, the down-leg property. However, the Hacienda Plaza sale was delayed during the closing process imperiling the exchange transaction. Under Colliers’ guidance, the buyer utilized a Reverse 1031 Exchange that required the Korean group to “park” its property with an Exchange Accommodation Titleholder (EAT), which will allow it to complete the exchange transaction with Hacienda Plaza after the purchase of the Walgreens site.
In addition to the near-record cap rate for a Walgreens location, this transaction was made all the more valuable because it was a fee-simple sale with an existing long-term lease in place with scheduled rent escalations, something rarely seen in the sales of single-tenant Walgreens locations, according to Lagos.
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