The recently closed Walgreens, located in Newport, Oregon, was the lowest cap rate for a Walgreens in the Pacific Northwest. Capital Pacific received 15 offers in 10 days – helping to push pricing to a level that many believed was not achievable.
Capital Pacific’s approach was to get away from the commodity side of pricing and instead create a story around why this is a great property and why it deserves benchmark pricing. Our competition was three other newly constructed Walgreens. We compared all three to Walgreens Newport in price, location, hard corner versus a soft corner, term, and option periods. In every instance, Capital Pacific believed we had a superior property and the market agreed.
The statistics of the sale speak for themselves, but like most statistics, what happens behind the scenes is often more interesting and telling. For three weeks straight I received upwards of 5 calls a day from owners and brokers. I still get a couple calls and emails on a weekly basis. One broker who couldn’t get a hold of me at lunch somehow got my home phone number. My wife called me and asked why she was called at home and asked for details on a “Walgreens or a Walmart aren’t they the same?” -she is a keeper.
Every day I speak with investors that ask me how long this compressed cap rate environment will last. The simple answer is, I don’t know. What I do know is this is a good time to be a Walgreens seller or Walmart for that matter.