Walgreens NNN property for sale has been around since the 1990’s. Third party build-to-suit developers began working with Walgreens to build out their national footprint and sell the underlying real estate to outside real estate investors. Typically, Walgreens for sale in the ‘90’s were 20-year terms and then eventually moved to 25-year lease terms. The landlords of Walgreens properties vary from institutional REITs to private investors throughout the country.

There are several ways to evaluate Walgreens NNN properties for sale which include lease length, lease option structure, rental increases, tenant credit, and underlying real estate quality. 

What Is an NNN Investment?

NNN investments have  many different lease types and are in many industries.  Some NNN leases that are true absolute net leases have the landlord responsible for nothing whatsoever, and all expenses are paid directly by the tenant.  Because the term “NNN leases” is used loosely, some brokers and investors may refer to a lease as NNN, even though the landlord may be responsible for roof, structure, parking lot, and may have to be reimbursed by the tenant for taxes or insurance.  Walgreens NNN property for sale is typically absolute net, or the landlord is responsible for the roof, structure, capital improvements to the parking lot, and other minimal property repairs. 

Having a real estate broker that has sold numerous Walgreens properties is essential when purchasing a Walgreens investment.  Brokers that have experience in selling drugstores — including Walgreens, CVS, and Rite Aid — are able to underwrite these assets properly, allowing an investor to weigh their risk versus return. 

Individual drugstore performance, real estate fundamentals, lease renewal likelihood, demographics, and traffic counts are a few considerations, in addition to the lease structures, that real estate brokers familiar with Walgreens properties will be able to analyze correctly for potential investors.

Real estate brokers who specialize in NNN properties typically will also have access to both their own listings and also off-market NNN properties for select investors they work with.  It is prudent for any drugstore investor working with an NNN real estate broker for the first time to ask for a list of their personal drugstore transactions and exclusive listings that they have full control over.  

A real estate broker who has personally sold and consistently has a number of Walgreens properties exclusively listed will be the most qualified for an investor to work with. Such a broker can also ensure for the investor  that any Walgreens NNN property for sale is underwritten correctly and that all risks to the assets are known upfront.  

What to Know Before Buying a Walgreens NNN Property

The positives to Walgreens property ownership include a strong corporate lease guarantee; healthy firm lease term before options; minimal landlord responsibilities; and typically good retail corner locations.  Walgreens’ thousands of locations across the country demonstrate that they are a safe investment for property owners who want little management work and a secure income. 

The barriers to entry to the drugstore sector are much greater in comparison to other retail chains. However, because of Walgreens’ stores unique positioning,  they have the ability in the future to continue to make strategic partnerships within the healthcare sector. 

With such a large North American footprint, many Walgreens stores are on the market,  and investors must treat each location differently when considering a purchase.  Not all Walgreens leases are the same and all stores have different sales volumes.  As with any real estate investment, owners must also consider when purchasing Walgreens NNN property any prior environmental history, building and roof age, easements, property restrictions, future possible development, and other underwriting factors. 

Another benefit to purchasing a Walgreens property is that prior to the development of a Walgreens, the developer or Walgreens typically reviews the parcel for the above considerations. As a result, there may be prior third-party reports on the site, allowing for a more transparent purchase. Additionally, Walgreens has approved and reviewed each store prior to construction for long-term positioning and profitability in the area.  

Most Walgreens are located on signalized corners with high traffic counts and good access. Many are also located in surrounding retail corridors that have complementary retail or healthcare tenants that will drive traffic to the Walgreens location. A tenant like Walgreens allows investors many options when financing their investment. Lenders know that Walgreens leases are safe, and rents are predictable because of the chain’s strong financial position. For this reason, investors can achieve some of the best financing available with Walgreens in the NNN property market. 

What Are the Differences Among Walgreens Properties?

The main difference between lease types for Walgreens NNN property for sale is that they are not all absolute net.  Some leases have the landlord responsible for the roof and structure, while others may have certain expenses such as tax, insurance, landscaping, or other maintenance items paid for by the landlord. 

These expenses are sometimes reimbursed by Walgreens but may not be reimbursed, giving landlords additional out-of-pocket expenses that must be considered in their pricing.  Walgreens with more management or out-of-pocket expenses will trade at higher CAP rates because there is a smaller buyer pool willing to deal with certain management items.  

Walgreens leases will also vary in firm lease term length before the option periods and may have different lease option structures.  The longer the guaranteed rent in the firm lease term before the lease renewal options, then the lower the return for an investor.  In addition, shorter initial lease terms have fewer financing options available during the purchase and at a possible refinance event once an investor’s loan comes to maturity.  

Walgreens locations need to be viewed differently even if they have similar lease terms remaining before the options and similar lease types. Analyzing the lease renewal probability is the most important analysis an investor can do during a purchase of a drugstore.  The likelihood of lease renewal of a Walgreens NNN property that’s for sale hinges on many factors.  When an investor’s loan comes due, performance of the Walgreens location, surrounding competition, local population, and employment growth are just a few issues that come into play when analyzing if Walgreens plans to renew their lease.