CVS For Sale
There are a number of different types of CVS properties for sale when compared to other freestanding net leased tenants. CVS property for sale can range in square footage, tenant operations, building type, lease structure and ownership structure. These factors directly impact the value of any CVS for sale and should be considered in addition to the typical valuation factors of real estate quality and lease term remaining before the options. Some CVS for sale are zero cash flow ownership structures where the entire rental payments go to the lender to pay down the debt giving the landlord zero cash flow during the primary lease term. Many times these CVS properties for sale have a rent holiday for CVS at the end of the primary term before the lease options. These zero cash flow CVS investments are valued completely differently than the typical CVS for sale.
Most CVS for sale are fee simple ownership structures; however, there are some CVS for sale that are infill ground lease structures that may have increases in the primary lease term or have larger increases in the renewal option periods versus a typical CVS lease. Another ownership type that is more prevalent with CVS for sale are the leasehold ownership structures. These CVS properties have a ground owner but then also a leasehold position that can become available for sale.
Another differentiator between CVS properties for sale is the lease structure. Some CVS for sale are absolute net with zero landlord responsibilities and other CVS for sale are double net with varying landlord responsibilities. Of the double net CVS property for sale some have roof, structure or parking lot responsibilities and some may have reimbursable expenses pertaining to common areas if located within a shopping center. CVS properties all have varying business operations which directly affect store profitability. CVS properties for sale have a minute clinic or are 24 hour operations which are preferred by many net lease investors. Most CVS stores for sale have store operating hours until 8 PM to 10 PM. Some CVS stores may have beer, wine or liquor sales as well.
These are all smaller factors that help investors value CVS for sale especially when stores sales volumes are not available to the landlord. If a CVS for sale has a few of these positive subtle differences over another CVS for sale then it provides comfort to an investor in the likelihood of CVS remaining as a tenant for years to come.
In addition to these factors, two main drivers in pricing of CVS property for sale are the primary lease term remaining before the renewal options and the real estate quality. Most CVS for sale that have over 15 years of primary lease term before the options will trade sub 6.25 CAP. Other CVS for sale that have less than 5 years of lease term before the options may trade over a 7 CAP depending on the real estate quality.
As with most net leased properties, the main value is the credit strength of the tenant and the lease in place but obviously all investors regardless of property type consider the real estate quality. The difference with CVS for sale is that an investor must understand the backfill rent per square foot and
compare that with the likelihood of CVS renewing the lease to see if they are purchasing the risk at a fair CAP rate. The factors mentioned in this article will allow any investor considering a purchase of a CVS investment a way to gauge value between one CVS for sale versus another CVS for sale when real estate quality is even.
Due to these varying factors in CVS properties for sale it’s important to work with a broker who has a firm understanding of drugstore properties and who has closed a variety of CVS properties for sale.
Does CVS own real estate?
CVS owns some of their real estate that they have either developed internally or purchased through acquiring another pharmacy chain. Over the years, CVS has sold many locations that they developed through sale leasebacks.How big is the average CVS?
CVS buildings typically range from 9,000 square feet up to 30,000 square feet. Most CVS freestanding buildings are in the 10,000 square feet to 16,000 square feet range. There are some CVS buildings, mostly in California, that are shopping center anchors or supplementary inline space that are over 20,000 square feet.
