Thursday, November 30, 2006

75 years flat lease for a Walgreen's???

I was just reviewing a package for 5 brand new Walgreen's NNN investments through the South. Flat leases for the initial 25 year term which is acceptable with such a high quality tenant. But, the remaining 50 years of 5 year options are flat too!! And the initial cap rates are between 6% and 6.2% Not very attractive. In my opinion, these deals will sell, but some buyer is not taking in to account the depressed value of these deals over the next 5 decades. And let me ask, How many retailers have survived any 75 year span?