MetroGroup Realty Finance, a Newport Beach, California-based private commercial mortgage banking firm, has secured permanent refinancing for a portfolio of three Walgreens store locations totaling 38,639 square feet across northern Illinois on behalf of a private investor. All three properties are leased to The Walgreen Company on lease terms of 50 years. The refinancing replaces two maturing CMBS loans and returns a portion of the equity to ownership, according to MetroGroup’s founder and president, Patrick Ward.
“Our client, Scott Ketchum, owns a portfolio of Walgreens locations and specializes in selling Walgreens stores nationwide,” Ward said. “As an experienced Walgreens investor, he bought these locations at an attractive price, ensuring that alternative uses would be viable in the event Walgreens were to exercise their termination right.”
According to Ward, Walgreens store leases of this vintage are typically structured with a 50-year term, with the tenant retaining termination rights every five years after the first 20-year period. Due to the age of the leases at the time of refinancing, all three properties had either just renewed on this five-year basis or were in the process of a renewal or lease renegotiation. Because of this, the acquisition of financing was more complex, and MetroGroup had to incorporate the varying stages of each lease and the associated risk if a store decided not to renew on the upcoming five-year term.
“We were able to provide fixed-rate terms to match the various options of each of The Walgreen Company leases, providing our client with the flexibility to fully execute his investment strategy,” said Ward.
The three assets are located at 3803 Auburn Street and 1602 Kishwaukee Street in Rockford, Illinois, and 15 S. Orchard Drive in Park Forest, Illinois. The three stores were built in the early-to-mid-’90s, with their original leases extending up to 50 years. The total dollar volume of the financing was $3.69 million for the portfolio.
“The Walgreen Company is an investment-grade tenant, making it important that we replace our existing maturing debt with equally attractive new terms,” said Scott Ketchum, owner, investment broker and MetroGroup’s client in this transaction.
