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 located in Maryville, Missouri, for $5,300,000. Walgreens has 20 years remaining left on the absolute NNN lease with 50 one-year options. Baum Vice Presidents Patrick Forkin and Brad Teitelbaum represented the seller in the transaction, a Missouri based private developer. The purchaser was a private investor on the West Coast who entered into the transaction as part of a 1031 exchange.
The Walgreens property was encumbered by a fully-amortizing loan, sometimes referred to as a self-liquidating loan. Unlike more traditional mortgage loans, so called ‘fully-amortizing loans’ match the amortization period of the loan to the primary term of the lease. Put differently, a borrower’s loan payoff coincides with the expiration of the initial term of the lease on their property.
The Challenge – Often these self-liquidating loans require a significant prepayment penalty. According to Forkin, “a substantial number of Walgreens properties are encumbered by these self-liquidating loans. Typically, the owners of these Walgreens properties do not consider the possibility of selling due to the penalties that associated with paying off the loan early.”
The Payoff – “Single tenant net lease properties that are free-and-clear of existing debt usually command higher prices given the favorable financing options in the market today”, added Baum’s Teitelbaum. “But given today’s low cap rate environment, sellers can realize prices that equate to substantial returns even after paying off their loan,” he said.
The Process – Baum’s investment sales team worked with the lender in the Walgreens transaction to provide a smooth and successful pay-off of the loan at closing. Additionally, Forkin and Teitelbaum generated multiple offers which resulted in the property trading at 99% of asking price. “We continue to see strong interest for long-term triple net leased Walgreens, including within secondary and tertiary markets like Maryville, Missouri,” said Forkin.