Cole Real Estate Snaps Up 13 CVS Drugstores

Purchased for $71 million, the properties are brand new and occupied under single-tenant, triple-net-leased agreements.

February 1, 2011
By Barbra Murray, Contributing Editor

Cole Real Estate Investments has just picked up a 174,000-square-foot portfolio of CVS drugstores spanning 11 states from coast to coast. The 13 properties are brand new and occupied under single-tenant, triple-net-leased agreements.

Marcus & Millichap Real Estate Investment Services orchestrated the sale of the group of drugstores on behalf of an unnamed party relying on the firm’s Philadelphia office. All 13 of the assets are less than two years old and are located in California, Florida—including a property in Naples (pictured)–Georgia, Kansas, Minnesota, Mississippi, New Jersey, New York, Oklahoma, South Carolina and Texas. Cole will not have to worry about maintaining the portfolio’s 100 percent occupancy level for a while. The lease agreements for the properties are not scheduled to expire until 2035.

Assets fully occupied by solid retailers like CVS, a survivor of the retail market collapse, are high on investors’ list of coveted properties at the moment. “Single-tenant net-leased properties with national-credit retailers will remain the most sought-after deals as high-net worth individuals and well-funded REITs compete for acquisitions,” Marcus & Millichap concludes in its 2011 outlook report. Stable income flow is the priority of the day.

For buyers hoping to snap up newly developed CVS-occupied stores this year, options will not increase by much because, as noted in the report, the drugstore chain plans to decrease the pace of new store openings in order to focus on rival buyouts, which the retailer expects will encompass 200 independent pharmacies over the next two years.

Regardless of the future availability of new CVS-leased properties for purchase, investment sales in the retail market are widely expected to go on a significant upswing this year. Marcus & Millichap vice president for investments Dean Zang asserted that the portfolio sale demonstrates that investors are increasing their transactions nationwide. He added that as cap rates continue to compress for Class A assets, he expects to see acquisition volume increase in the B and C sector moving into 2011.