Wednesday, April 22, 2009

I Want a WAG!

By David Sobelman

NYSE: WAG! Walgreens has always been the stereotypical net lease investment. Bringing together single-tenancy, strong credit, triple net lease, and a "Main and Main" location, investors have sought out Walgreens as long term/stable investments. This current market cycle has only accentuated the desire for a WAG in one's portfolio. It wasn't that long ago that when you explained the potential return one would receive from this bond-like investment, roughly 6.5 - 7.5%, people would shun the notion of accepting that yield for such a long and finite period. However, compared to today's Money Market and CD rates, that CAP Rate doesn’t look all that bad. In fact, it may be higher than what people are currently receiving in similar "stable" investments.

There are dozens of Walgreens for sale today. But when you have several to choose from, the real estate of the site becomes ever more important. Gone are the days that you could purchase a WAG in Leoti, KS and believe that it is the exact same investment as one in Sarasota, FL. Lenders will look at the assets completely differently, even though the same lease, same credit and same building (most likely) will be present.

So pick your investments wisely as even WAG investors are becoming more discriminating.

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