Buying a property net leased to Walgreens, CVS or Rite Aid is widely regarded as one of the safest, most secure real estate investments. Unlike many other retail investment properties, every property leased by Walgreens, CVS or Rite Aid is guaranteed by the full assets of the billion dollar corporations.
Walgreens and CVS have not, and will not, default. Rent is paid monthly, like clockwork. And will be for the next 20+ years of the lease.
As an owner of a property leased to Walgreens, CVS or Rite Aid, you will have ZERO management responsibilities and ZERO exposure to any unforeseen costs or expenses. The standard drugstore lease is truly triple-net (NNN), meaning that the Tenant itself is legally obligated to handle the payment and management of ALL operating expenses, insurance, and property taxes.
As an investor, there are no hidden fees and NO OWNERSHIP HEADACHES! Walgreens or CVS, as the tenant, is solely responsible for maintenance, repair and insurance costs in addition to rent.
In many ways, owning an investment property NNN leased to Walgreens or CVS is like owning a corporate bond--your investment will produce a fixed yield to maturity. There are no expense pitfalls as can be found in other types of real estate investments.
Owners of drugstore properties enjoy the same financial benefits as all other real estate investors: leverage, depreciation, and tax savings.
Leverage can allow an investor to use borrowed money to maximize cash flow in the shorter-term, or structure a longer-term loan for estate planning purposes. As a result of Walgreens and CVS stellar credit ratings and financial standing, there are a variety of financing options available to investors. In fact, in today's market, Walgreens' and CVS' credit is highly sought after by lenders, so borrowers are offered more favorable terms than are available for many other commercial property investments.
Depreciation of a commercial real estate investment provides most investors with very significant after-tax savings. In fact, the tax savings provided by depreciation are often the primary reason investors choose to allocate a portion of their net worth to real estate investments. Walgreens properties, like all commercial property, is depreciated over 39 years, on a straight-line basis. However, for the savvy and sophisticated investor, returns may be enhanced by accelerated depreciation.
We have found that the vast majority of Walgreens and CVS buyers are considering their longer-term, family estate planning when acquiring a Walgreens property.
Likely, for all of the reasons above:
Don't forget that you are buying real estate! Generally speaking, when you buy a property leased to Walgreens or CVS, you will be buying the best corner in town. Walgreens and CVS are highly selective in their site selection criteria, and most new stores are located at "Main and Main."
For the past two decades, the Walgreens and CVS corporate real estate departments have been the darlings of the NNN industry. They simply are the best at site selection. Each site must run through a gauntlet of corporate hurdles, including:
Walgreens and CVS are corporations with long-term vision. They have a strategy and plan which they have executed well. A key component of that strategy is opening stores in locations that will be the most profitable. Remember, when Walgreens or CVS signs a lease to open a new store they are committing to pay rent at that location for at least 20 years! As an investor, you can rest assured that each location has been thoroughly vetted by Walgreens or CVS corporate and, as a result, may be more likely to hold value, or appreciate with future development, than any other investment property.
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