BARRINGTON, IL-Two pharmacies in the Chicagoland area have sold in net lease deals totaling $15.1 million. A San Francisco-based individual doing business under the name Walgreen’s Barrington 1 LLC acquired a Walgreen’s property for $9.28 million, while Agree Realty Corp. purchased a CVS property for $5.8 million.
The trades illustrate the cap rate differential between a preferred tenant in an infill location and a lesser quality tenant in an emerging location, according to Randy Blankstein, president with The Boulder Group, a Northbrook, IL-based net lease brokerage and investment firm. Blankstein and Jimmy Goodman, also of The Boulder Group, brokered the Walgreen’s sale.
Both properties have 24-year leases with their respective tenants. The Walgreen’s property, located at 189 Northwest Hwy. in the affluent city of Barrington, IL, traded at a 7.3% cap rate. The CVS asset, located at the intersection of West Algonquin and Lakewood Roads in the emerging market of Lake in the Hills, IL, sold at a 7.76% cap rate – a difference of nearly 40 basis points compared to the Walgreen’s property, Blankstein pointed out.
Blankstein tells GlobeSt. that Walgreen’s is the preferred retailer in the pharmacy space. “This was one of the highest priced Walgreen’s sold in 2010 and demonstrates the desirability of core single tenant properties in the present market environment,” he says. “Net lease properties with investment grade tenants in major metro areas are receiving, very strong investor interest, but those in second tier and third tier markets still pretty shallow.”
Moreover, Lake in the Hills is a developing residential area on the outskirts of Chicago where growth has slowed over the past couple of years. Barrington, on the other hand, is a well-established and high-barrier-to-entry market.
The private investor behind Walgreen’s Barrington 1 LLC acquired the pharmacy property as part of a 1031 exchange out of a multifamily property in San Francisco. The buyer put credit-tenant lease financing on the property that matures at the end of the lease term, Blankstein notes. The seller was a preferred Walgreen’s developer based in Chicago.
Meanwhile, Agree Realty acquired the CVS property from the developer, Goodman Properties of Jenkintown, PA. Currently, the Farmington Hills, MI-based investor owns and operates a portfolio of 75 primarily net leased properties located in 15 states and totaling 3.5 million square feet.
“Agree is a buyer that has become more active as of late,” Blankstein notes.
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