Ohio

  • Price: $4,248,571
  • NOI: $223,571
  • Cap Rate: 5.25%
  • Remaining Term: 24 years
  • Escalations: none
  • Year Built: 2014
  • Lease Type: NNN
  • 10 Five Year Options to extend

CVS Health Corporation (S&P BBB+) operates over 9,600 retail drugstores in the US. CVS has the strongest credit profile amongst the 3 largest drug stores (S&P ratings Walgreens and Rite Aid are BBB and B respectively). NYSE: CVS 2016 Operating Revenue: $177.5 billion Pros: From the financial strength of the tenant standpoint, CVS leads over competitors Walgreens and Rite Aid. And when buying the drugstores, you are essentially buying a flat, bond-like return. This being the case, it makes sense to buy the corporate backer with the strongest balance sheet if you are looking to receive their rent checks over the next 10, 15, 20, 25 years. This is a true Triple Net Lease with zero Landlord responsibilities. CVS offers an attractive option for the investor looking for “mail box” money. Cons: The problem with any flat lease is what happens to your principle if Cap Rates begin to rise? What if in a rising Cap Rate environment, this same CVS footprint is being offered not at today’s 5.25% Cap Rate, but at a 6.25% Cap Rate? The value of this 5.25% store will decrease. The principle value of any property with a flat lease will be crushed in an increasing Cap Rate setting.

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