In December 2014, a Joint venture(the “JV”) owned and controlled by affiliates of Cantor Fitzgerald (50% ownership), Mesirow Financial (25% ownership) and Net Lease Capital Advisors (25% ownership) acquired nine properties located in three states as part of a larger sale-leaseback transaction with Wallgreen Co. Each Property is 100% leased to Wallgreen Co. (Wallgreens)on a long term, triple-net basis with contractual contract. The offering is designed for accredited investors seeking to participate in a tax-deferred 1031 exchange as wells as those seeking a real estate investment that generates current returns.
Long-term Leases with Rent Escalations
The JV negotiated new 15-year leases directly with Walgreens that commenced December 19, 2014 and include 12 five-year renewal options for a total potential lease term of 75 years. The leases contain 5% rental increases every five years for the primary 15 year term and the first four option periods and adjust to fair market rent thereafter.
Absolute Net Leases
Wallgreens is responsible for all operating expenses, repairs, maintenance and capital expenditures at the Properties during the lease term.
Investment Grade Tenant with Parent Guaranty
Walgreen Co. is rated Baa2 by Moody’s and BBB by Standard & Poor’s. In the event that Wallgreens fails to maintain certain net work covenants and in “investment grade” credit rating by either Standard & Poor’s or Moody’s, Walgreens shall cause its ultimate parent, which is currently Walgreen Boots Alliance Inc. (NASADQ: WBA), to execute a guaranty of the leases.
Average sales for the Properties, as of of the trailing 12-month period ending May 31, 2014 of $10.5 million, are over 20% higher than annual sales of a typical Walgreens store of $8.5 million.
The Properties have been open for business an average 15.9 years (as of December 1, 2015) and each property features a Drive-thru.
Eight of the Nine Properties are located at signalized intersections with an average daily traffic count of over 29,000 vehicles. The Kirkwood property is located mid-block along a major retail thoroughfare in downtown, Kirkwood., Missouri with an average daily traffic count of over 33,000 vehicles.
Long Term Financing
The Properties are financed with a Loan featuring an anticipated repayment date in year 10 and ultimate maturity date in year 15, matching the financing to the initial lease maturity.