Chicago-based Baum Realty Group, LLC(“Baum”), one of the Midwest’s leading retail brokerage firms, announced the sale of a single-tenant net leased Walgreens property located at 8700 South Kedzie Avenue in Evergreen Park (Chicago), IL for $6,881,000.
Baum Vice Presidents Patrick Forkin and Brad Teitelbaum represented the seller in the transaction. The purchaser was a private investor out of New York who entered into the transaction as part of a 1031 exchange, purchasing the property site-unseen.
Prior to the sale, the property was a “Zero Cash Flow” investment property. Zero cash flow properties refer to real estate investments with debt that is fully amortizing, where the amortization period matches the primary term of the lease. After the primary term of the lease is completed, the investor owns the property free-and-clear.
Single tenant net leased properties that are free-and-clear of existing debt, including zero cash flow properties, usually command higher prices, especially given the favorable financing options in the market today. Therefore, the seller pre-paid the loan balance at sale closing to maximize their value.
According to Forkin, the seller was required to make a substantial pre-payment fee in order to pay the loan off early. “Most owners do not consider the possibility of selling properties encumbered by long-term debt due to the steep penalty, however, today’s low cap rate environment allows sellers to realize prices that equate to substantial returns, even after paying off their loan.”
“We continue to see strong interest for long-term triple net leased Walgreens, especially for those located within dense and major metropolitan areas”, added Teitelbaum.
The Walgreens property has 15 years remaining on an original twenty-five year lease. The property is located approximately ten miles southwest of downtown Chicago and less than 5 miles from Midway International Airport. The 14,820 square foot building is situated on 1.75 acres at the hard corner of the heavily trafficked signalized intersection of West 87th Street and South Kedzie Boulevard.
