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When Will Cap Rates Bottom Out?

LOS ANGELES—The sale of a triple-net Walgreens at a record-low cap rate of 4.2% shows that cap rates for net lease product are still coming down, GlobeSt.com reports EXCLUSIVELY.

By Kelsi Maree Borland | kelsimareeborland | Updated on March 07, 2016

Walgreens Huntington Park Walgreens has 22 years left on its lease term.

LOS ANGELES—A private and unnamed investor has purchased a triple-net leased Walgreens in Huntington Park at a record-low cap rate of 4.22%; the lowest cap rate paid for a triple-net retail property over $10 million in Los Angeles and one of the lowest cap rates nationwide. For the past several years, the market has seen and increasing demand for trip-net product, and this lease shows that demand is continuing to climb.

“The sale of the Huntington Park Walgreens represents the lowest cap rate for a single-tenant Walgreens in Los Angeles County priced over $10 million ever,” Patrick Kent, SVP at Hanley Investment Group, tells GlobeSt.com. “There is no doubt this is a rare sale of a Walgreens in Los Angeles County. Only one other Walgreens with an initial lease term of at least 14 years remaining traded hands in Los Angeles County in 2015. This type of investment doesn’t come up for sale very often. This transaction is another great example of the high demand for well-located single-tenant investments, specifically for credit retailers like Walgreens with a corporate guaranteed lease with investment grade credit.” Kent and his colleague EVP Bill Asher represented the seller in the transaction, while Nigel Keep and Bill Kurfess of Kidder Mathews represented the Northern California-based buyer.

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