Best Commercial Retail 02-23-09

1. CVS Pharmacy in Fairfax Station, VA: 10,125 SF drug store built in 1999 in an affluent (AHI $147K/yr) and well educated Washington DC suburb. 100% NNN leased. NOI $228K/yr with rare 8% rent increase every 5 yrs. Store with strong $8.9M annual sales. $3.517M. 6.5% cap.
2. Shopping Center in Irving, TX: 54,543 SF shopping center on 4.37 acres corner lot in a high income Dallas metro. 100% occupied by 14 tenants with low rents. NOI $353K/yr. $4.15M. 8.52% cap.
3. Shopping Center in Chula Vista, CA: 48,213 SF 4-yr old retail center on 4 acres lot in a growing San Diego metro. 100% NNN leased by 2 national tenants. Babies R Us and Pier 1 Import. 100% NNN leased. NOI $574K/yr. $8.2M. 7% cap. Buyer to assume $6.6M loan at low 5.5% interest till 2016.
4. Taco Bell in Bakersfield, CA: 2500 SF Taco Bell on ½ ac out parcel to a shopping center anchored by Food Maxx, Longs Drugs, and Dollar Tree. 100% NNN leased with Taco Bell corp guaranty. NOI $109K/yr with over $34K of percentage rent. $1.4M. 7.83% cap. Note: investor owns the land and tenant owns the building.
5. Popeyes Restaurant in Huntsville, AL: 2365 SF restaurant on .57 acre lot on a major commercial corridor. Store with strong sales of over $2.2M (avg revenue for Popeyes is just over $1M). 100% absolute NNN lease. NOI $96K/yr with 10% rent increase every 5 yrs. $1.2M. 8% cap.
6. Walgreens in Riverdale, GA: 14,820 SF brand new drug store located on Hwy 85 in Atlanta metro. 25 yrs NNN lease. NOI $635K/yr. $8.411M. 7.55% cap.
7. Strip center in Folsom, CA: 4369 SF strip center in a fast growing and wealthy Sacramento suburb. Surrounded by Raley’s, Lowe, Office Depot, Orchard Hardware, Trader Joe, Save Mart. 100% NNN leased by 4 tenants. NOI $136K/yr. $1.95M. 7% cap.
   
   © copyright eFunding Inc. 2009. All rights reserved.

Top 7 Properties of Feb 20, 2009

1. Carrows Restaurant in Visalia, CA: 5640 SF franchised restaurant on .92 ac lot across from College of the Sequoias in a fast growing and good income city. 100% NNN lease with corp guaranty. NOI $156K/yr. $2.092M. 7.5% cap.
2. Medical office condo in Loma Linda, CA: brand new 6836 SF class-A medical office condo as part of a 68,000 SF office & retail complex in a fast growing and high income city. 100% NNN leased by Loma Linda University Medical Center till 2016. NOI $247K/yr. $3M. 8.25% cap.
3. Elephant Bar in Greenwood Village, CO: 7000 SF successful chained restaurant and bar built in 2004 on 1.3 prime acres lot in a wealthy (AHI over $120K/yr) Denver metro. 20 yrs absolute NNN corp lease with 15 yrs left. NOI $338K/yr with 10% rent bump every 5 yrs. $4.8M. 7% cap.
4. Shopping center in Oklahoma, OK: 18,182 SF retail center on 2.69 acres parcel on a major artery. 100% NNN leased by FYE Music (national tenant) and regional restaurant chain City Bites. NOI $244K/yr. $2.75M. 8.9% cap.
5. Shopping Center in Saginaw, TX: 21,290 SF shopping center on 3 acres parcel in a fast growing Dallas metro. Shadow-anchored by Albertsons. 100% NNN leased by good tenants. NOI $461K/yr. $5.567M. 8.29% cap.
6. Shopping center in Los Angeles, CA: 11,969 SF shopping center in densely-populated city with over 1M residents within 5 miles. 100% NNN leased by 8 tenants. NOI $396K/yr. $5.95M. 6.67% cap.
7. AppleBee’s in Albuquerque, NM: 4901 SF restaurant on 1.2 acres lot in a fast growing and high income area. New 20 yrs NNN lease. NOI $188K/yr. $2.355M. 8% cap.
   
   © copyright efunding Inc. 2009. All rights reserved.

Top 10 Properties Feb 19 2009

Why settle for 2% interest rate in a 1-year CD when you could invest in these properties with much higher returns?

1. Tuffy CarX in Austin Suburb: brand new 5461 SF automotive repair shop in a booming (112.28%) Austin suburb. 100% absolute NNN corp lease. NOI $137K/yr. $1.723M. 8% Cap.
2. Resort & Lodge in Big Bear Lake, CA: Why work for someone else? own your own business! 64-room attractive resort & lodge next to lake with indoor pool/sauna. NOI $250K/yr. $3.050M. Note: price includes both real estate and business.
3. Shopping Center in McDonough, GA: 42,000 SF shopping center on 5 acres of land recently constructed next to Kroger’s Supermarket with a good tenant mix. 75% leased. NOI $440M. $5.5M. 8% Cap.
   Upside potential when fully leased.
4. Wendy’s Restaurant in Denver, CO: 3,030 SF restaurant on .83 acre lot at a high traffic signalized intersection just off of I-70. 100% NNN lease with corp guaranty. NOI $64K/yr. $800K. 8.05% Cap. Recession insensitive tenant! Great for 1st time investors.
5. Humperdinck’s Restaurant in Richardson, TX: 8,100 SF restaurant on 1.21 acres of land in Dallas metro near I-635/Hwy-190. 100% NNN leased. NOI $125K/yr. $1.4M. 8.93% Cap.
6. Dollar General in Houston, TX: 9,014 SF retail building on 1.21 acres of parcel off of Hwy-610. 100% NNN leased. NOI $82K/yr. $969K. 8.5% Cap. Recession insensitive tenant!
7. Rite Aid Pharmacy in San Jacinto, CA: 17,272 SF pharmacy with drive-thru on 1.8 acres of land at major signalized intersection. New 20-years NNN lease with rent increases. NOI $409K/yr. $5.290M. 7.75% Cap.
8. Shopping Center in Wheeling, IL: 27,058 SF mature shopping center shadow anchored by 7-Eleven at signalized intersection. 92% leased. NOI $293K/yr. $3.9M. 7.5% Cap.
9. Applebee’s Restaurant in Methuen, MA: 5,300 SF restaurant in middle-class (AHI $76K/yr) neighborhood close to I-213/Hwy-495. 100% NNN corp lease. NOI $135K/yr. $1.8M. 7.5% Cap.
10. CVS in Anderson, IN:10,125 SF CVS Pharmacy on 1.86 acres of land built in 1999 at signalized intersection. Long NNN copr lease. NOI $188K/yr. $2.282M. 8.25% Cap.
    Strong revenue of $920/SF means tenant is highly profitable.
    Low 2% rent to revenue ratio means tenant is likely to renew lease
    
    © copyright efunding Inc 2009. All rights reserved.

Top 10 Properties of Feb 18, 2009

1. Shopping Center in Las Vegas, NV: 29,735 SF shopping center shadow-anchored by a Latino supermarket on over 2 acres of land in close proximity to Hyw-515. Actual NOI $461K/yr. $5.5M. 8.4% Cap.
   -Upside potential when completely leased.
2. Jack in the Box in Dallas, TX: 2,348 SF Restaurant on .51 acre lot successfully operating in current location since 1970 at busy intersection. 14-yrs absolute NNN corp lease. NOI $57K/yr. $980K. 5.87% Cap.
3. Casa Gallardo Restaurant in Des Peres, MO: 9,700 SF eye-catching restaurant owned by El Torito restaurant chain on 1.45 acres of parcel across Westfield West County Mall/I-270 in affluent (AHI $169K/yr within 1 mile radius) St. Louis suburb. 15-yrs absolute NNN corp lease with 10% increases every 5-yrs. NOI $188K/yr. $2.038M. 9.25% Cap.
4. Office Building in Stockton, CA: 4519 SF well-maintained office building built in 1975 on hard corner location. 100% NNN leased. NOI $52K/yr. $753K. 7% Cap.
   -New renovations done recently & new roof in 2000
5. Strip Center in Cypress, CA: 7,699 SF strip center on .51 acre lot built in 1986 at a signalized intersection in wealthy (AHI $97K/yr) Los Angeles metro. 100% leased. NOI $190K/yr. $2.727M. 7% Cap.
6. Retail Center in Hawthorne, CA: 17,675 SF retail center on 1.28 acres of land built in 1988 at prominent retail intersection close to I-405. 100% leased. NOI $495K/yr. $7.075M. 7% Cap.
7. Shopping Center in Arlington, TX: 70,000 SF shopping center in almost 6 acres of land across CVS Pharmacy between four major thoroughfares. 88% NNN leased. ACTUAL NOI $458K/yr. $5.088M. 9% Cap.
   -Price below replacement cost
   -Upside potential when fully leased
8. Office Building in Norcross, GA: 12,843 SF office building conveniently located near I-85. 100% NNN leased. NOI l$155K/yr. $1.862M. 8.35% Cap.
9. Office Building in San Jose, CA: 3300 SF recently renovated office building on .22 acre lot in San Jose Downtown. $1.350M.
   -Ideal for owner-user!!
10. Office Building in Rocklin, CA; 4,560 SF office building constructed in 2007 in booming (166.57%) affluent ($97K/yr) Sacramento suburb near Hwy-65/ I-80. 100% NNN leased by two medical tenants. NOI $115K/yr. $1.697M. 6.83% Cap.
    
    © copyright eFunding Inc 2009. All rights reserved.

Top 10 Properties of Feb 17, 2009

1. Office Building in Tamarac, FL: 27,828 SF two-story office building near University Hospital and close to I-817 in growing & strong income (AHI $55K/yr) area. NOI $301K/yr. $3.5M. 8.61% Cap.
2. Big 5 Sporting Goods in Parker, CO: 11,562 SF new retail building at the intersection of C-470 Hwy in a booming (47%) and wealthy Denver suburb. 100% NNN leased with corp guaranty. $2.4M. 7.23% Cap.
3. Restaurant in Roseville, CA: 4,558 SF attractive former IHOP restaurant on 2.7 acres of land built in 1997 close to Hwy-80 in Sacramento metro. Way below replacement costs: Only $900K. Strong upside potential when 100% leased.
   -Only $197 per sf.
   -Fully equipped
   -Excellent for owner-user
4. Strip Center in Covington, GA: 8,802 SF nice-looking strip center on 1.30 acres of parcel built in 1999 close to I-20. 100% NNN leased by 4 tenants. NOI $127K/yr. $1.550M. 8.20% Cap.
5. Retail Center in Gainesville, FL: 10,000 SF strip center built in 1998 next to Oaks Mall/I-74 across North Florida Regional Medical Ctr. 100% leased. NOI $148K/yr. $1.8M. 8.28% Cap.
6. Day Care in Addison, TX: 24,908 SF Day Care Building on 1.39 acre lot built in 1995 in affluent (AHI $126K/yr.) Dallas suburb. 100% NNN corp lease with 2% annual increases. NOI $300K/yr. $4M. 7.5% Cap.
   Possible Seller Financing
7. Applebee’s Restaurant in Albuquerque, NM: 5387 SF restaurant on 1.43 acres of land shadow-anchored by Target near I-40. New 20-years NNN corp with rent increases. NOI $233K/yr. $2.915M. 8% Cap.
8. McAlister’s Deli in Champaign, IL: 3344 SF restaurant on 1.3 acres of land built in 2007 at the entrance of Market Place Mall. Long NNN lease. NOI $175K/yr. $1.981M. 8.85 Cap.
9. Medical Office in Phoenix, AZ: 28,539 SF medical office on 3.6 acres of land at busy signalized intersection. 100% leased. NOI $340K/yr. $3.4M. 10% Cap.
10. Rite Aid Pharmacy in Charlotte, NC: 10,908 SF pharmacy on 1.82 acres of lot located at hard corner. 100% NNN leased. NOI $235K/yr. $2.693M. 8.75% Cap.

© copyright eFunding Inc. 2009. All right reserved.

Best Commercial Properties Feb 16, 2009

1. Smoke Bones Barbeque & Grill in Lithonia, GA: 6,028 SF Restaurant on over 2 acres of land built in 2005 on prominent retail area near The Great Lakes Mall. 20-years NNN corp lease with 1.75% annual rent boost. NOI $170K/yr. $1.896M. 9% Cap.
2. Shopping Center in Mesa, AZ: 62,672 SF beautiful shadow-anchored shopping center on 8.23 acres of parcel recently renovated on primary retail corridor. 96% leased. NOI $429K/yr. $5,368M. 8% Actual Cap.
3. Strip Center in Austin, TX: 10,140 SF 2-years old stunning center on 1.2 acres of parcel at the intersection of two main thoroughfares in fast growing area. 100% NNN leased. NOI $209K/yr. $2.8M. 7.5% Cap. Buyer to assume $2M loan at 5.83% interest.
4. Goodwill Store in Sacramento, CA: 26,730 SF Goodwill Store on 2.34 acres of parcel adjacent to Rite Aid and Food Maxx. 100% NN leased with annual CPI increases. NOI $219K/yr. $3M. 7.32% Cap.
5. Strip Center in Mission, TX: 13,600 SF 2-years old modern center on 1.24 acres of land in booming area. 100% NNN leased by National, Local and Regional tenants. NOI $256K/yr. $3.050M. 8.4% Cap.
6. Shopping Plaza in Las Vegas, NV: 23,649 SF retail center built in 2002 on 2.52 acres lot in a growing and high income area in Las Vegas. Next to Orleans Hotel/Casino. 95% NNN leased. NOI $679K/yr. $9.1M. 7.5% cap. Buyer to assume $7M loan at low 5.08% interest. 10.68% cash on cash.
7. Buffalo Wild Wings restaurant in Alpharetta, GA: 6071 SF Buffalo Wild Wings restaurant (NASDAG: BWLD) built in 2004 on 1.7 acres lot in a prime commercial corridor near Hwy 400 in an affluent (AHI $113K/yr) Atlanta suburb. 100% NNN corp lease with 11 years remaining. NOI $192K/yr with 1% annual rent bump. $2.401M. 8% cap.
8. Starbucks in Austin, TX: 1750 SF new Starbucks on .61 acre lot in a fast growing and wealthy (AHI $115K/yr) area. 10 yrs NNN corp lease. NOI $85K/yr with 10% rent bump every 5 yrs. $1.15M. 7.4% cap.
9. Shopping Center in Springfield, OR: 96,027 SF neighborhood center on 8.74 acres lot in a stable city. Anchored by Safeway Supermarket with 430 parking spaces. 92% NNN leased with 70% space leased to regional or national tenants. Proforma NOI $1.033M. $11M. 9.29% cap. Partnership liquidation.
10. Retail Center in Riverdale, UT: 4800 SF retail center shadow anchored by Lowes/Petco built in 2003 at busy intersection. 100% NNN lease. NOI $135K/yr. $1.640M. 8.25% Cap.
    
    © copyright eFunding Inc. 2009. All rights reserved.

Top 7 Properties of Feb 13, 2009

1. Strip Center in Bartlett, TN: 13,940 SF strip center on almost 3 acres of land built in 2004 near Wolfchase Gallerial Mall in dominant retail area in Memphis metro. NNN leases. NOI $228K/yr. $2.450M. 9.34% Cap.
2. Strip Center in Mansfield, OH: 13,400 SF two-tenants strip center on 1.25 acres of land in major retail corridor near Wal-Mart Supercenter. 100% NNN leased. NOI $292K/yr. $3.630M. 8.04% Cap. Buyer to assume $2.350M loan at 5.56%.
3. Shopping Center in Tucson, AZ: 79,121 SF attractive center on 5.68 acres of parcel renovated in 02/08 shadow anchored by Save-A-Lot Grocery. 87% NNN leased. ACTUAL NOI $462K/yr. $5.725M. 8.10% Cap.
   Upside potential when fully leased
4. Arby’s Restaurant in American Fork, UT: 3700 SF Restaurant on over 1 acre lot in growing area surrounded by many national tenants. 100% absolute NNN corp lease. NOI $114K/yr. $1.350M. 8.5% Cap.
5. Joe’s Crab Shack Restaurant in Houston, TX: 8,500 SF Restaurant beautifully landscaped on Hwy-6 close to West Oaks Mall. 100% absolute NNN corp lease with 10% increases ever 5-yrs. NOI $259K/yr. $3.054M. 8.5% Cap.
6. Macaroni Grill Restaurant in Grapevine, TX: 7,876 SF restaurant on 1.84 acres of land built in 1992 with great visibility to Hwy-114/121. New 20-yrs absolute NNN corp lease with 2% annual increases. NOI $223K/yr. $2.787M. 8% Cap.
7. Retail Center in Hattiesburg, MS: 13,500 SF retail center recently built on 1.17 acres of parcel adjacent to Wal-Mart Sepercenter. 100% NNN leased. NOI $221K/yr. $2.845M. 7.8% Cap.
   
   © copyright eFunding Inc. 2009. All rights reserved.

Best 10 Commercial Properties Feb 12, 2009

1. Office Max in McAllen, TX: brand new 18,000 SF Office Max on 2.46 acres of land as part of 46 acres lifestyle center anchored by Kohl's, Best Buy, Target, Ross, Marshalls, Hobby Lobby, Bealls and PetSmart. Fast growing (40% growth since 2000) and high income (AHI $87K/yr) metro near Mexico border benefited from Nafta trade agreement. 10 yrs NNN lease with corp guaranty. NOI $288K/yr. $3.84M. 7.5% cap.
2. El Patio restaurant in Fremont, CA: 8525 SF restaurant in a high income area (AHI $100K/yr). 100% NNN leased till 2018 by a successful business that has been around for 25 yrs. NOI $225K/yr. $3M. 7.5% cap.
3. Checker Auto Parts in Colorado Springs, CO: 7000 SF 2-yr old single-tenant retail building in a booming (101% since 2000) and high income (AHI $93K/yr) Briargate master-planned community. 15 yrs NNN lease with strong corp guaranty by the parent company that also owns Kragen & O’reilly Auto Parts. NOI $133K/yr. with 10% rent bump every 5 yrs. $1.797M. 7.4% cap.
4. Shopping center in McAllen, TX: 30,250 SF shopping center built in 2006 as part of a 46-acre lifestyle center anchored by Kohl's, Best Buy, Target, Ross, Marshalls, Hobby Lobby, Bealls and PetSmart. 100% NNN leased by 3 brand name tenants: Old Navy, Shoe Carnival, and Dots Fashion. NOI $464K/yr. $5.807M. 8% cap.
5. Strip center in Riverside, CA: 6000 SF strip mall built in 2001 on an outparcel to a shopping center anchored by Albertsons and Petco in fast growing (67%) and high income (AHI $92K/yr) city. 100% NNN leased by 3 tenants. NOI $164K/yr. $2.25M. 7.32% cap.
6. Retail center in Port Charlotte, FL: 3842 SF retail center on an outparcel to a Publix supermarket anchored shopping center. 100% NNN leased by Dunkin Donut-Baskin Robin Ice Cream and Subway. NOI $154K/yr. $1.721M. 9% cap.
7. Shopping Center in Lawrenceville, GA: 7800 SF multi-tenant retail center built in 2004 on 1ac lot in a booming (127% since 2000) and strong income Atlanta suburb. 100% NNN leased by 5 tenants. NOI $102K/yr. Only $1M. 10.26% cap!
8. Jack In The Box in San Jacinto, CA: 2654 SF restaurant on .68 ac corner outparcel to a shopping center anchored by Walgreens and Fresh & Easy Grocery in a high-growth (45% since 2000) Inland Empire city. 100% NNN leased till 2027 with corp guaranty. NOI $75K/yr with 10% rent increase every 5 yrs. $1.2M. 6.25% cap.
9. Goodyear Tire in Corona, CA: 7935 SF Goodyear Tire store on .68 acre lot just off Riverside Freeway exit in a fast growing and high income area. 100% absolute NNN lease with corp guaranty. NOI $84K/yr. $1.211M. 7% cap.
10. Macaroni Grill restaurant in Timonium, MD: 7400 SF Italian restaurant built in 1997 on 2.45 acres parcel. Great location: just off I-87 exit and before all the shops in an affluent (AHI $113K/yr) Baltimore suburb. 20 yrs absolute NNN lease with guaranty from a corp with 230 restaurants. NOI $234K/yr. with 2% annual rent increase. $2.932M. 8% cap.
    
    © Copyright eFunding Inc. 2009. All rights reserved.

Top 10 Properties of Feb 11, 2009

1. Mini-Skool Childcare center in Flower Mound, TX: 8500 SF childcare center built in 2003 on 1.97 acres in a affluent (AHI $99K/yr)and fast growing (24%) Dallas suburb. 20 yrs absolute NNN lease with guaranty from a national tenant with 130 locations in 13 states. NOI $128K/yr. with annual rent bump. $1.555M. 8% cap.
2. Walgreens in Reno, NV: 14,820 SF brand new drugstore on 2.32 acres parcel at a signalized intersection in a fast growing city. New 25 yrs NNN lease. NOI $430K/yr. $5.73M. 7.5% cap.
3. Home Depot in Countryside, IL: 117,838 SF Home Depot built in 2004 on 10.68 acres in a high income (AHI $102K/yr) Chicago metro. 20 yrs corp ground lease (you own the land and tenant owns the building) with 13 yrs remaining. NOI $475K/yr. $6.787M. 7% cap.
4. Advance Auto Parts in Odessa, TX: 15,000 SF free-standing building constructed in 1988 on 1.3 acres parcel in a stable city. Tenant has been at this location since 1988 and just exercised 5 yrs renewal in 2008. NOI $179K/yr. $2.048M. 8.75% cap. Recession insensitive tenant.
5. Shopping Center in San Dimas, CA: 21,684 SF shopping center next to Hwy 57 and across the street from Lowe’s in a densely-populated and high income city in Los Angeles. 86% leased at below market rent. Profoma NOI $409K/yr. $5.4M. 7.59% cap.
6. Office building in Petaluma, CA: 9288 SF 3-story class-A office building constructed in 1990 in the business district. 100% occupied. NOI $117K/yr. $1.695M. 6.9% cap.
7. Burger King in Houston, TX: 3390 SF restaurant built in 1990 on a major artery in a wealthy (AHI $107K/yr within 1 mile radius) & growing part of Houston. New 20 yrs absolute NNN lease by a successful franchisee with 50 locations. NOI $85K/yr. Only $1.134M. 7.5% cap. Great for 1st time investors.
8. Burger King in Houston, TX: 2929 SF restaurant on .73 acre lot on heavily-travelled I-10. 20 yrs absolute NNN lease by an experienced franchisee with 50 locations. NOI $114K/yr. $1.485M. 7.5% cap.
9. Starbucks in Humble, TX: 1850 SF brand new coffee shop on .63 acre in a fast growing (50% since 2000), high income Houston Northern suburb. 10 yrs NNN lease. NOI $68K/yr with 10% rent bump every 5 yrs. Only $883K. 7.75% cap.
10. Pier 1 Imports in Pacific Grove, CA: 10,443 SF Pier 1 store on Lighthouse Avenue in an affluent coastal town with AHI over $134K/yr. 100% leased by Pier 1 Imports till 2012. NOI $159K/yr. $1.995M. 8% cap.
    
    © Copyright eFunding Inc. 2009. All rights reserved.

How Properties Are Selected

Every day there are about 300-350 new retail and office properties between $700K to $15M on the market in all 50 states listed by various companies. Out of these hundreds of listings, only the top 5-10 properties make it to the list that you see on this blog. By focusing on the short list of best properties, you will save time and are more likely to be successful with your investments.
Below are some of the selection criteria:
1. Price range: most investors look for properties between $700K and $15M.
2. Property types: most if not all investors of eFunding want to invest in retail properties and office buildings where tenants sign long term low-risk NNN leases, i.e. tenants pay for property taxes, insurance and maintenance expenses, in favor of landlords. They prefer not to invest in apartments where leases are mostly riskier gross, i.e. landlords pay for taxes, insurance and unpredictable maintenance expenses. Besides, apartment tenants normally don’t have much money which may affect their ability to pay the rent on time.
3. Cap rate: the return of investment must be “reasonable”, e.g. generally higher than the interest rate. The cap rate is typically lower in CA and higher in other states. However cap rate is not everything.
4. Property condition: investors prefer properties with little deferred maintenance.
5. Demographics: the selected properties tend to be in growing, high income and bigger cities/metros as they have better chance to appreciate and easier to find tenants. Besides they are easier to sell if needed.
· You won’t see properties in an area where people are moving out, e.g. Detroit downtown. These properties are easy to buy but hard to sell. In addition, it’s hard to get attractive financing, if at all, for these properties.
· Properties in a middle of nowhere won’t make it to the lists. These are also easy to buy but hard to sell.
· Properties in cities where the average household income is way below the national average, e.g. $28,000/year, also won’t make it to the list as these are most likely high-crime areas.
6. Occupancy: close to 100%.
7. Good Visibility: properties tend to have most if not all units facing the road to show case the tenant businesses. Tenants love visibility. What’s good for tenants is also good for investors.
8. Great locations: properties on a major artery with heavy traffic, near the freeway exit, on corner lot, near a mall, on an outparcel to a shopping center.
9. Land: if land is not included then it does matter how beautiful the property is, it will not be selected. This is the type of property that is easy to buy but hard to sell.
10. Lease Type: most likely NNN leases.
11. Parking spaces: at least 4 spaces per 1000 SF of leasable space.. It’s hard to lease a retail property unless it has sufficient parking spaces.
12. Age: not over 20 yrs old unless the property is well-maintained or recently renovated.
13. Price per square foot: sometimes a property is selected because the price per SF is low, e.g. less than $200/SF for a retail property in California. The main reason for the selection is appreciation potential.
14. Low rent: there is upside potential if the rent is below market. When the leases expire, the rent is adjusted to market rent which increases the value of the property.
15. Financing: sometimes a property may be selected because it offers attractive financing. For example, the seller is willing to carry 80% LTV at low interest rate or buyer can assume a loan at 5.5% interest, fixed for 10 years. This in turn may increase the overall return or cash on cash. On the other hand, a property may be screened out because it is difficult to get reasonable financing. For example, in this tight credit market it is extremely difficult to get financing for a single-tenant mom-and-pop restaurant.
16. Misc: A property could be selected or screened out for other reasons
· If a property has a dry cleaner with onsite cleaning, it will not be selected due to potential soil contamination by a chemical called Perc used in the cleaning process.
· A property in an affluent Santa Monica, CA could be selected simply because it’s rarely available.
· A vacant restaurant in front of a mall in San Francisco Bay Area could make the list because it may have lots of interests from investors in CA.

Top 7 Properties Among 350+ Feb 10, 2009

1. LA Fitness Center in Hemet, CA: 50,000 SF brand new state-of-the-art Fitness center on 4.71 acres lot in a prime commercial corridor. Surrounded by Home Depot, Target, Longs Drug, Vons, Ross, Marshall in a growing city. 15 yrs NNN lease with corp guaranty by LA Fitness International. NOI $750K/yr with 10% rent bump every 5 yrs. 10M. 7.5% cap. Buyer to assume $7.07M non-recourse loan at 5.84% interest due in 10 yrs.
2. Walgreens in Rockwall, TX: 14,820 SF brand new drugstore on 2 acres parcel in a high growth (66% since 2000), high income (AHI $86K/yr) Dallas suburb. 25 yrs absolute NNN lease. NOI $360K/yr. $4.965M. 7.25% cap.
3. Winn Dixie Supermarket in Columbus, GA: 43,079 SF supermarket on 4 acres lot in a stable city. 100% NN leased till 2017 and guaranteed by a Fortune 500 company. NOI $342K/yr. $3.8M. 9% cap.
4. Single-tenant medical building in Ogden, UT: 10,812 SF medical office building across the street from Newgate Mall, and Costco in Salt Lake City metro. 100% NNN leased by Intermountain Health Care. NOI $150K/yr with 3% annual rent bump. $1.778M. 8.44% cap. Seller will finance at 6.5% interest.
5. Rite Aid in Wilmington, MA: 15,040 SF drugstore on 1.3 acres parcel in a stable and high income (AHI $92K/yr) Boston suburb. Long term lease. NOI $272K/yr. $3.108M. 8.75% cap.
6. Arby’s restaurant in Peoria, AZ: 3100 SF restaurant built in 2001 on .72 acre pad site to Home Depot and Sears in a growing and high income Phoenix metro. 100% absolute NNN lease till 2021 with corp guaranty. NOI $131K/yr. $1.873M. 7% cap.
7. Rite Aid in Westford, MA: 15,103 SF drugstore in an affluent and growing Boston metro with AHI over $132K/yr. New 20 yrs absolute NNN lease. NOI $307K/yr with 10% rent bump every 10 yrs. $3.839M. 8% cap.
   
   © Copyright eFunding Inc. 2009. All rights reserved.

Best Commercial Properties of Feb 9, 2009

1. Single-tenant retail in Lancaster, CA: 11,311 SF single-tenant inline retail building as part of a larger shopping center next to Hwy 14/138. Surrounded by Home Depot, Big K-mart, Kragen Auto Part, Sav-On Drugs, and Vons Supermarket. 100% NN leased by Goodwill Industries. NOI $196K/yr. $3.028M. 6.5% cap.
2. Retail Center in Palm Springs, CA: 10,295 SF retail center on 1.2 acres corner outparcel to Stater Bros Supermarket anchored shopping center in a growing and affluent area with AHI over $110K/yr within 1 mile. 100% NNN leased by 3 brand name tenants. NOI $197K/yr. $2.825M. 7% cap.
3. Single Tenant Retail in Santa Clarita, CA: 4235 SF free-standing pride-of-ownership retail building on ¾ acres corner outparcel to a 104,701 SF community center. Across the street from Wal-mart and Sam’s Club in a high growth city. Easy access to I-5. 100% NNN leased by Time Warner Cable. NOI $165K/yr. $2.54M. 6.5% cap.
4. Strip Mall in Gilbert, AZ: 5916 SF retail strip on ¾ acres lot in a booming (66% growth) and affluent (AHI $94K/yr) Phoenix metro. 100% NNN leased by 4 tenants. NOI $145K/yr. $1.815M. 8% cap.
5. Family Dollar Store in Weirsdale, FL: 9014 SF brand new Family Dollar Store on 1 ac lot in a fast growing and strong income inland town. 10 yrs NNN lease with corp guaranty. NOI $106K/yr. $1.373M. 7.75% cap.
6. Office Building in Turlock, CA: 4400 SF class-A office building constructed in 2005 on ½ ac parcel in a growing and strong town South of Modesto with easy access to hwy 99. 100% leased by 3 tenants. NOI $62K/yr. Only $840K. 7.5% cap.
7. Shopping Plaza in Midland, TX: 93,956 SF shopping plaza in a wealthy petroleum producing region with AHI over $90K/yr. 100% leased. NOI $843K/yr. $9.5M. 8.87% cap.
   
   © Copyright eFunding Inc. 2009. All rights reserved.

Top 10 properties among 350+ 02/06/09

AHI: Avg Household Income

1. Rite Aid in Douglasville, GA: 11,275 SF pharmacy on 2 acres parcel in a growing and high income town in Atlanta suburb. New 20 yrs absolute NNN lease. NOI $255K/yr. with 10% rent bump every 10 yrs. $3.292M. 7.75% cap.
2. Medical Office Building in Port Jefferson, NY: 12,477 SF 2-story office building on .62 acres parcel across from John Mather Memorial Hospital in a high income town (AHI $111K/yr) in the suburb of New York City. 100% NNN leased. NOI $331K/yr. $3.95M. 8.4% cap.
3. Shopping Center in Norcross, GA: 103,402 SF shopping center on 9.87 acres corner parcel in Atlanta metro with 4 points of ingress/egress. Anchored by Food Depot Grocery 100% NNN leased. NOI $792K/yr. $9.9M. 8% cap.
4. Strip Mall in Orange Park, FL: 13,800 SF strip center on 1.25 acres lot near Orange Park Mall in a growing Jacksonville metro. 91% NNN leased. NOI $137K/yr. $1.725M. 7.95% cap.
5. Family Dollar Store in Tampa, FL: 10,000 SF Family Dollar store on 1.75 acres lot in a stable area. 100% NNN corp lease. NOI $75K/yr. Only $882K. 8.5% cap.
6. Shopping Center in Romeoville, IL: 11,167 SF retail center built in 2004 on 1.44 acres lot near I-55 in a booming and high income Chicago suburb (95% growth since 2000). 100% NNN leased. NOI $157K/yr. $1.9M. 8.29% cap. Only $170/SF!
7. Shopping Center in Corpus Christi, TX: 23,175 SF shopping center developed in 2007 on 3.47 acres lot at a signalized intersection in a growing and strong income area. 100% NNN leased. NOI $429K/yr. 5.4M. 8% cap.
· High-quality construction
· Excellent visibility
8. Starbucks in Fort Myers, FL: 1750 SF brand new Starbucks Coffee shop just off I-75 exit in a wealthy (AHI $159K/yr) area. 10 yrs NNN corp lease. NOI $150K/yr. $2.04M. 7.35% cap.
9. Rite Aid in Clemson, NC: 14,547 SF drug store on 1.68 acres lot in a growing and high income Winston-Salem metro. 20 yrs NNN lease with 10% rent bump every 10 yrs. $2.662M. 8% cap.
10. Jiffy Lube in Pearland, TX: 4155 SF new Jiffy Lube on 1.5 acres parcel in a booming (81% growth) middle class (AHI $86K/yr) Houston suburb. 20 yrs absolute NNN lease by an experienced franchisee with 112 stores. NOI $151K/yr with 10% rent increase each 5 yrs. $1.896M. 8% cap.

© copyright eFunding Inc. 2009. All rights reserved.

Top 5 retail properties of 02-05-09

1. Strip Center in Irving, TX: 2-years old 14,415 SF strip center on over 3 acres of land across I-635 in dominant affluent Dallas suburb. 100% NNN leased. NOI $314K/yr. $3.3M. 9.54% Cap.
2. Walgreen’s Pharmacy in Olympia Fields, IL: 14,490 SF Walgreen’s Pharmacy on 1.42 acres of parcel built in 2004 at a signalized intersection in a wealthy Chicago suburb. Long absolute NNN lease. NOI $349K/yr. $4.861M. 7.2% Cap.
3. Rite Aid Pharmacy in Las Vegas, NV: 16,709 SF Rite Aid Pharmacy in growing middle-class (AHI $70K/yr within 1 mile radius) area. Long NNN corp lease. NOI $366K/yr. $4.575M. 8% Cap.
4. Shopping Center in Richmond, TX: 16,195 SF shopping center built in 2007 on 1.88 acres of land. 100% leased by local/regional tenants. NOI $343K/yr. $3.8M. 9.04% cap.
5. Shopping Center in Houston, TX: mature 14,459 SF well-maintained retail center on 1.44 acres of parcel in fast growing area. 89% NNN leased. NOI $147K/yr. 8.4% Actual Cap.
   Upside potential: additional income when fully leased.
   
   © copyright eFunding Inc 2009. All rights reserved.

Top 7 Retail Properties Feb 4, 09

1. New Walgreens in Sacramento, CA: 14,490 SF new Walgreens on over 2 acres corner lot in a growing Sacramento suburb. New 25 yrs NNN lease. NOI $412K/yr. $6.103M. 6.75% cap.
2. Medical Office Building in Colorado Springs, CO: 18,222 SF 10-yrs old 2-story class-A medical office building on 2.32 acres lot in a growing and high income (AHI $85K/yr). 92% NNN long term leased. NOI $226K/yr. $2.775M. 8.16% cap.
3. Just Brakes in Tampa, FL: new 3800 SF Brakes specialist store on ½ acre. 10 yrs NNN lease by a regional tenant with over 140 stores. NOI $102K/yr with 10% rent bump every 5 yrs. $1.28M. 8% cap.
4. Goddard Childcare in Keller, TX: 8000 SF brand new childcare center on 1.1 acres parcel in a booming (268% since 2000) and high income (AHI $81K/yr) Dallas suburb. 15 yrs absolute NNN lease by #1childcare franchise in the US. NOI $172K/yr with 12% rent increase every 5 yrs. $2.123M. 8.1% cap.
5. Walgreens in Clayton, NC: 14,470 SF pharmacy built in 2004 on 1.36 acres corner lot in a fast growing Raleigh suburb. 25 yrs absolute NNN lease. NOI $310K/yr. $4.231M. 7.35% cap.
6. Office Building in Santa Clara, CA: 12,400 SF 2-story office building on 27,000 SF lot near San Jose airport with easy access to highway 101. 85% leased. NOI $232K/yr. $2.9M. 8% cap.
7. Shopping center in Miami, FL: brand new 21,032 SF 14-unit retail center on 1.7 acres lot in prime commercial area near Mall of The Americas. 80% NNN leased. NOI $519K/yr. $6.7M. 7.75% cap. Upside potential when 100% leased.

© copyright eFunding Inc. 2009. All rights reserved.

Top 8 Retail Properties of Feb 3, 09

1. Rite Aid in Paramount, CA: 13,450 SF pharmacy built in 2005 on an outparcel to a 94,841 SF shopping center in area with high barriers to entry. 20 yrs NNN lease with 10% rent increase every 10 yrs. NOI $340K/yr. $4.788M. 7.1% cap. Seller very motivated.
2. Strip mall in Phoenix, AZ: 7534 SF strip mall built in 2005 on 1 ac parcel adjacent to Walgreens and Autozone. 100% NNN leased by 6 tenants. NOI $166K/yr. $2M. 8.31% cap.
3. Strip Center in Castro Valley, CA: small 4840 SF retail strip on ¼ ac lot in an area with AHI over $83K/yr. with easy access to I-580. 100% NNN leased by 3 tenants. NOI $62K/yr. $950K. Seller to provide 70% financing at low 5% interest.
4. O’reilly Auto in Decatur, GA: 6800 SF brand new auto parts store on 1.4 acres lot in Atlanta metro. 20 yrs NNN corp lease. NOI $110K/yr. $1.419M. 7.75% cap.
5. Shopping Center in Tucson, AZ: 99,033 SF shopping center on over 8 acres of land. Anchored by a grocery store, Autozone, Big 5 Sporting Goods, and family Dollar. 96% NNN leased. NOI $860K/yr. $10.25M. 8.4% cap.
6. Retail center in Sacramento, CA: 10,791 SF retail center built in 2007 on 1.1 ac lot on Stockton blvd just 100 yards from Hwy 99. 100% NNN leased. NOI $321K/yr. $4.15M. 7.74% cap.
7. KFC restaurant in Bartow, CA: 2091 SF restaurant on 1/3 acre parcel in a growing city. New 20 yrs absolute NNN lease by an experienced operator with 7 locations in CA. NOI $73K/yr with 10% rent bump every 5 yrs. $1.149M. 6.355 cap.
8. Shopping center in Plano, TX: 192,267 SF shopping center on over 16 acres corner parcel in a affluent (AHI over $107K/yr) Dallas suburb. Anchored by an high-volume Albertsons. 85% NNN leased. NOI $1.15M. $13.15M. 8.75% cap.
   
   © copyright eFunding Inc. 2009. All rights reserved.

Best Commercial Properties of Feb 2, 2009

1. Tuffy Auto Service Center in Rock Hill, SC: 5120 SF recently built retail building on .70 acre lot adjacent to Home Depot in Charlotte suburb. 20 years NNN corp lease with rent increases. NOI $129K/yr. $1.612M. 8% Cap.
2. Strip Center in Fort Worth, TX: 9961 SF retail building on 1 acre lot built in 2008 just off of I-35. 100% NNN leased by 5 tenants. NOI $200K/yr. $2.508M. 8% Cap.
3. Retail Center in Des Moines, IA: 12,000 SF strip center on 1.48 acres of parcel built in 1997 just North of Southdale Regional Mall. 100% NNN leased. NOI $235K/yr. $2.775M. 8.5% Cap.
4. Retail Center in Greenwood, IN: 18,200 SF mature retail center on 2 acres of land across Greenwood Park Mall along Hwy-31. 92% NNN leased. NOI $259K/yr. $3.250M. 8% Cap.
5. Goodwill in Sacramento, CA: 26,730 SF retail building on 2.34 acres of parcel shadow anchored by Food Max/Rite Aid near Hwy-99. 100% NNN leased. NOI $219K/yr. $3M. 7.32% Cap.
6. Medical Office in San Antonio, TX: 6000 SF beautiful upscale medical office at busy intersection close to North Central Baptist and Methodist Hospitals. New 5-years NNN lease. $1.4M.
7. Neighborhood Center in Ormond Beach, FL: 36,024 SF luxurious shopping center on 3.32 acres of land built in 2005 with good visibility near I-95. NOI $657K/yr. $9.225M. 7.13% Cap.
   
   © Copyright eFunding, inc. 2009. All rights reserved.

Best Retail Properties of Jan 30, 2009

1. Cottonwood Crossing Center in Irving, TX: 57,571 SF recently renovated shopping center on 5.78 acres of land ideally situated between Hwy-161/183 in Dallas metro. 96.2% NNN leased. NOI $689K/yr. 8.5M. 8.22% Cap.
2. Strip Center in Holland, OH: 17,500 SF nice-looking strip center on 3.62 acres of parcel built in 2005 on busy thoroughfare near I-475. NOI $247K/yr. $2.750M. 9% Cap.
3. AUCTION-- Office Building in Spartanburg, SC: 10,989 SF office building on .79 acre lot near Mary Block Hospital. 100% NNN leased by Mary Black Health Systems. NOI $140K/yr. $1.6M. 8.75% Cap.
4. Strip Center in Alcoa, TN: 19,325 SF strip center on 1.56 acres built in 2006 in growing area at signalized intersection close to I-129 in Memphis suburb. 100% leased. NOI $369K/yr. $4.1M 9% Cap.
5. Childtime Childcare in Chula Vista, CA: 8280 SF day care center on .96 acre lot built in 2000 surrounded by luxurious new housing development near I-805. Long NNN corp lease by a national childcare provider. NOI $203K/yr. $2.548M. 8% Cap.
6. Auto Zone in Moreno Valley, CA: 7,400 SF recently constructed Auto Zone retail building on .73 acre lot across Home Depot. New 20 years NNN corp lease with 10% boost every 5-years. NOI $159K/yr. $2.650M. 6% Cap.
7. Neighborhood Center in Escondido, CA: 22,140 SF beautiful shopping center on 1.42 acres of land shadow anchored by Albertsons Supermarket with only one small unit vacant. NOI $549K/yr. $6.460M. 8.5% Cap.
8. Retail Building in Corona, CA: 21,000 SF mature retail building on over 1 acre lot. New 5-years NNN lease. NOI $234K/yr. $2.1M. 10% Cap.
   
   © copyright eFunding Inc. 2009. All rights reserved.

Walgreens, CVS or Rite-Aid: Which Tenant Is Best in 2009?

There are 3 major drugstore chains in the US: Walgreens, CVS, and Rite Aid. The table below ranks the companies by market capitalization and sales revenue as of January 2009:

1. Walgreens ranks #1 with market cap of $25.56B, $59.95 Billion in revenue, 6443 stores and S&P rating of A+.
2. CVS ranks #2 with market cap of $38.33B, $85.27 Billion in revenue, 6245 stores and S&P rating of BBB+.
3. Rite Aid ranks #3 with market cap of $.317B, $26.41 Billion in revenue, 5059 stores and S&P rating of B+.
   

Investors purchase properties occupied by these drugstore chains for the following reasons:

1. The drugstore business is very recession-insensitive. People need medicine when they are sick, regardless of the state of the economy. Both rich and poor people in the US have access to medicine. Some even argue that low-income people use more medicine due to free or low-cost drugs offered by government-assisted programs.
2. The drugstore business has a good prospect in the US:
   · People are living longer and need more medicine to sustain longevity. Older people tend to use more medicine than younger ones. As the 78 million baby boomers are getting closer to retiring age starting from 2008, the drugstore chains anticipate the demand for medicine to increase in next 20 years.
   · The drug market continues to expand as the US population will continue to grow.
   · There are new drugs to treat old or previously untreatable illnesses, and new diseases, e.g. Viagra for men’s unhappiness, Zoloft for depression, Avastin for colon cancer, Herceptin for breast cancer, Nicotine patches for smokers to kick the habit, Tamiflu for a potential Bird Flu pandemic, Tekturna/Rasilez for hypertension and various new drugs for AIDS and Attention Deficit Disorder (ADD). The new medicines are very expensive, e.g. a year’s supply of Avastin costs about $55,000. Eli Lilly has sold about $4.8 billion of Zyprexa in 2007 for schizophrenia and yet most people have never heard of this medicine.
   · Technology and modern life introduce and require new products, e.g. pregnancy test kits, diabetic monitors, electronic toothbrushes, contact lenses, lenses cleaners, diet pills, vitamins, birth-control pills, IUDs, nutrition supplements and Cholesterol-lowering pills (Americans spent nearly $26B in 2006 on Cholesterol medications alone per IMS Health, a Connecticut-based consulting company that monitors pharmaceutical sales.) There are also more surgeries: C-sections, Kidney transplants, open-heart triple by-pass, and breast augmentations. More surgeries mean more medicines are needed such as potent pain killers, and Warfarin to prevent blood clots in surgeries.
   · Before the customers can get to the medicine aisles or pharmacy counters, they have to pass by chocolates, sodas, digital cameras, watches, toys, dolls, wines, cosmetics, video games, flowers, fragrances, greeting cards, etc. As a result, customers buy more than their prescriptions and medicine in these drugstores. CVS reported that non-pharmacy sales represented 30% of the company’s total sales in January of 2007. The figure for Walgreens is 34% and 33% for Rite Aid. Many pharmacy locations are in effect convenience stores especially ones that are in residential or rural areas.
3. These companies sign very long-term, NNN leases, guaranteed by their corporate assets. This makes the investment in the underlying property fairly low risk, especially for Walgreens with an A+ S&P rating. In fact, these properties are sometimes referred to as investment-grade properties. Once the drugstore chains sign the lease, they pay the rent promptly and timely. This author is not aware of any properties leased by one of these drugstore chains in which the tenants failed to pay rents. Even when the stores are closed due to weak sales (Walgreens closed 119 stores in 2007), these companies may sublease the properties to other companies and continue to pay rents on the master leases.

The main downside about investing in pharmacies is there is little or no rent bump for a long time, e.g. 20-50 years, especially for Walgreens. So the rent is effectively reduced after inflation is factored in. This is one of the main reasons these properties do not appeal to younger investors.

Among 3 drugstore chains, Walgreens and CVS pharmacies in general have the best locations—at major intersections while Rite Aid has the worst locations. The new Rite Aid pharmacies tend to concentrate in smaller cities where it may be the only pharmacy in town with little or no competition. The 3 drugstore chains now have a new formidable competitor, Wal-mart. Wal-mart sells prescription drugs in more than 4000 Wal-mart, Sam’s Club and Neighborhood Market stores in 49 states. The retail giant is known for launching in 2006 a highly-publicized $4 generic prescription drug program which now sells 350 generic medications for a 30-day supply.

Walgreens: Walgreen Company was founded in 1901 by Charles Walgreen, Sr. in Chicago. While the company has existed for more than 100 years, most stores are only 5-10 years old. This is the best managed company among the three drugstore chains and also among the most admired public companies in the US. Due to its superior financial strength--S&P A+ rating-- and premium irreplaceable locations, properties with leases from Walgreens get the highest price per square foot and/or the lowest cap rate among the 3 drugstore chains. In addition, Walgreens gets flat rent or very low rent increase for 20 to 60 years. The cap rate is often in the low 6% to 7% range in 2009. Investors who buy Walgreens tend to be closer to retirement age. They are looking for a safe investment where it’s more important to get the rent check than appreciation. They often compare the returns on their Walgreens investment with the lower returns from US treasury bonds or Certificate of Deposits from banks.

CVS: CVS Corporation was founded in 1963 in Lowell, MA by Stanley Goldstein, Sidney Goldstein, and Ralph Hoagland. The name CVS stands for “Consumer Value Stores”. As of 2009, CVS has about 6300 stores in the US, mostly through acquisitions. In 2004, CVS bought 1,200 Eckerd Drugstores mostly in Texas and Florida. In 2006, CVS bought 700 Savon and Osco drugstores mostly in Southern California. And in 2008 CVS acquired 521 Longs Drugs stores in California, Hawaii, Nevada and Arizona for $2.9B dollars. It is also bought Caremark, the largest pharmaceutical services company and changed the corporation name to CVS Caremark. When CVS bought 1,200 Eckerd stores, it formed a single-entity LLC (Limited Liability Company) to own each Eckerd store. Each LLC signs the lease with the property owner. In the event of a default, the owner can only legally go after the assets of the LLC and not from any other CVS-owned assets. Although the owner loses the guaranty security from CVS corporate assets, this author is not aware of any incident where CVS closes a store and does not pay rent.

Rite-Aid: Rite Aid opened its first store in 1962 as “Thrif D Discount Center” in Scranton, Pennsylvania. It officially incorporated as Rite Aid Corporation in 1968. Rite Aid is the weakest financially among the 3 drugstore chains. In 2007, Rite-Aid acquired about 1,850 Brooks and Eckerd drugstores, mostly along the East coast to catch up with Walgreens and CVS. In the process, it added a huge long term debt (currently owes $6.1B) and is the most leveraged drugstore chain. As of 2009, Rite-Aid has over 5,000 stores and over $26 Billion in revenues. Compared to Walgreens and CVS, Rite Aid is the weakest financially. Its one-year stock price declined by 92%. On January 21, 2009 Moody’s Investor Services downgraded Rite Aid from “Caa1” to “Caa2”, eight notches below investment grade. Both ratings are “junk” which indicate very high credit risk.

Things to consider when invested in a pharmacy
If you are interested in investing in a property leased by drugstore chains, here are a few things you should consider:

1. If you want a low risk investment, go with Walgreens. In stable or growing areas, the degree of safety is the same whether the property is in California where you get a 6% cap or Texas where you may get a 7% cap. So, there is no significant advantage to invest in properties in California as the property value is based primarily on the cap rate. In 2009, the offered cap rate for Walgreens seems to improve about .5% compared to previous years. So you might be able to get some appreciation in your investment when you sell at a lower cap rate in the future.
2. If you are willing to take more risk, then go with Rite-Aid. Some properties outside of California may offer up to 8.5% cap rate in 2009. However, among the 3 drug chains, Rite Aid has a very real high risk of going under in 2009. Should it declare bankruptcy, Rite Aid has the option to pick and choose which locations to keep open and which locations to terminate the lease. To minimize the risk that the store is shuttered, choose a location with strong sales and low rent to revenue ratio. This is especially critical on Rite Aid in smaller cities as Rite Aid seems-- for reasons unknown to this author-- to pay premium rents, i.e. 25-50% higher than market rents for properties in small towns.
3. If you are not a conservative investor or risk taker, you may want to consider a CVS pharmacy. It has BBB+ S&P credit rating. Its cap rate is higher than Walgreens but lower than Rite Aid. Some leases may offer better rent bumps. On the other hand, some CVS leases, especially for properties in hurricane areas are not truly NNN leases where landlords are responsible for the roof and structure. So make sure you adjust the cap rate down accordingly. Some of the CVS locations have onsite Minuteclinic staffed by registered nurses. Since this clinic idea was introduced recently, it’s not clear having a clinic inside CVS is a plus or minus to the bottom line of the store.
4. All 3 drugstore chains have similar requirements. They all want highly visible, standalone, rectangular property around 12,000 - 14,000 SF on a 1.5 - 2 acre lot, preferably at a corner with about 75 - 80 parking spaces in a growing and high traffic location. They all require the property to have a drive-thru. Hence, you should avoid purchasing an inline property, i.e. not standalone and property with no drive-thru windows, as there is a chance that these drugstores may not want to renew the lease. In addition, if you acquire a property that does not meet the new requirements, for example a drive-thru, you may have a problem getting financing as lenders are aware of these requirements.
5. If the pharmacy is opened 24 hours a day, it is in a better location. Drugstore chains do not open the store 24 hours day unless the location draws customers.
6. Some properties may have a percentage lease, i.e. the landlord can get additional rent when the store’s annual revenue exceeds a certain figure, e.g. $5M. However, the revenue used to compute percentage rent often excludes a page-long list of items, e.g. wine and sodas, tobacco products, items sold after 10 PM, drugs paid by governmental programs, etc. The excluded sales revenue could account for as much as 70% of store’s gross revenue. As a result, this author has never seen a store in which the landlord is able to collect additional percentage rent. The store with a percentage rent is required to report its monthly sales to the landlord. As an investors, you want to invest in a store with strong gross sales, e.g. over $500 per square foot a year. In addition, you also want to check the rent to revenue ratio. If the figure is in the 2-3% range, the store is likely to be very profitable so the chance the store is shut down is low.
7. It does not matter how good the tenants are, avoid investing in declining and/or low-income areas or small towns with less than 30,000 residents. These properties are easy to buy now and hard to sell later. In 2009 where the credit market is tight, you won’t be able to get any lenders to finance these properties.
8. Many properties have an existing loan that the buyer must assume. If you have a 1031 exchange, think twice about buying this property. You should clearly understand loan assumption requirements of the lenders before moving forward. Should you fail to assume the existing loan (assuming an existing loan is a lot more difficult than getting a new loan), you may run out of time for a 1031 exchange and may be liable to pay capital gain.
9. About 10% of the drugstore properties for sale and typically CVS pharmacies require very small amount of equity to acquire, e.g. 10% of the purchase price. However, you are required to assume an existing fully-amortized loan with zero cash flow. That is, all of the rent paid by the tenant must be used to pay down the loan. The cap rate may be in the 7% range, and the interest rate on the loan could be attractive in the 5.5% to 6% range. Hence, the investor pays off the loan in 10 to 20 years. However, the investor has no positive cash flow. This requires you to come up with outside cash to pay income tax on the rental profits (the difference between the rent and mortgage interest). The longer you own the property, the more outside cash you will need to pay income taxes as the mortgage interest will get less and less toward the end. So who would buy this kind of property?
   - The investors who have substantial losses from other properties or stocks market. By acquiring this zero cash flow property, they may offset the income from the drugstore tenant against the losses from other properties or stocks market. For example, a property has $105,000 of rental profits a year, and the investor also has rental losses of $100,000 from other properties. As a result, the combined profits are only $5,000.
   - The uninformed investors who fail to consider that they have to raise additional cash to pay income taxes.

David V. Tran is the Chief Investment Advisor at eFunding, Inc., a commercial real estate brokerage, commercial loan broker, and property management company in San Jose, CA. His website is http://www.efundingcom.com/. He may be contacted at (408) 288-5500. eFunding does business in all 50 states. David publishes on his blog a daily list of 10 best properties to invest in the US.

You are welcome to share this report, unedited and in its entirety, with anyone you like. You may not remove this text. © 2007-2009 eFunding, Inc.

Best Commercial Properties of Jan 29, 09

1. Shopping Center in Lubbock, TX: 19,900 SF attractive 3-years old shopping center on 1.81 acres outparcel to Wal-Mart Supercenter. 92% NNN leased. NOI $405K/yr. $4.652M. 8.71% Cap.
2. Medical Office in Buford, GA: 11,250 SF medical office built in 2005 in growing area near I-85/985 in Atlanta metro. 100% leased. NOI $110K/yr. $1.375M. 8.07% Cap.
3. Strip Center in Phoenix, AZ: 7534 SF strip center on 1 acre lot constructed in 2005 next to Walgreens. 100% NNN leased by six tenants. NOI $155K/yr. $2.1M. 7.39% Cap.
4. Ace Hardware Retail Building in Colleyville, TX: 20,400 SF retail building recently renovated adjacent to Vineyards Antique Mall on Hwy-26 in a fast growing Dallas suburb. New 10-years NNN lease. NOI $161K/yr. $1.8M. 8.95% Cap.
   Established operator currently operating 85 locations
5. Office Building in Tampa, FL: 15,500 SF nice-looking two-story office building on hard corner location. 100% NNN leased. NOI $205K/yr. $2.570M. 8% Cap.
6. Just Brakes in Mansfield, TX: 4082 SF retail building constructed in 2007 near US-287 in Dallas metro. 15-years NNN corp lease with 10% increases every 5-years. NOI $106K/yr. $1.378M. 7.75% Cap.
7. Shopping Center in Lancaster, CA: 32,662 SF shopping center on 2.38 acres of land built in 2005 anchored by national credit tenants at major signalized intersection. 100% NNN leased. NOI $383K/yr. $5.658M. 6.78% Cap.
8. Shopping Center in Pasadena, TX: 27,583 SF neighborhood center anchored by Family Dollar in fast growing area in Houston metro. 96% NNN leased. NOI $315K/yr. $4.1M. 7.7% Cap.
   
   © Copyright eFunding Inc 2009. All rights reserved.

Best 6 Retail Properties 01-28-09

1. Office Building in La Quinta, CA: 5,051 Spanish-style professional office building close to Hwy-111 in a growing/affluent (AHI $145K/yr within 1 mile radius) neighborhood. 100% leased. NOI $134K/yr. $1.495M. 9% Cap.
2. Goddard School in Allen, TX: brand new 10,000 SF day care facility surrounded by middle-class housing. New 15-years NNN lease with 3% annual rent increases. NOI $257K/yr. $3,083M. 8.35% Cap.
3. Retail Pad in Las Vegas, NV: 4110 SF retail pad on .48 acre lot built in 2004. 100% NNN leased. NOI $121K/yr. $1.425M. 8.52% Cap.
4. Office Building in Charlotte, NC: 11,025 SF brick office building on .56 acre lot. New 10-years NNN lease with 3% annual rent increases. $979K. 9% Cap.
5. Shopping Center in Duluth, GA: 15,300 SF shopping center on 1.47 acres of land adjacent to Gwinnett Place Mall. 66% Occupancy. Actual NOI $273K/yr. $3.3M. 8.3% Cap. *Upside Potential when 100% leased
   *Appraised at $3.6M in 2008
6. Rite Aid Pharmacy in Brockton, MA: 13,402 SF Rite Aid Pharmacy on 3.33 acres parcel across from Brockton Hospital. New 20-years absolute NNN lease with 10% increases every 10 years. NOI $281K/yr. $3.3M. 8.5% Cap.
   
   © Copyright eFunding, Inc. 2009. All rights reserved.

Top 5 Properties of -01-27-09

1. Blockbuster building in Fresno, CA: 6000 SF single-tenant retail building developed in 1997 as part of a shopping center anchored by Save Mart Supermarket and Longs Drugs. 100% NNN leased till 2012. NOI $124K/yr. $1.557M. 8% cap.
2. Medical Office building in Sacramento, CA: 5880 SF medical office building on .4 acre lot near I-80. 100% leased by 5 tenants. NOI $73K/yr. $1.015M. 7.2% cap.
3. Strip center in Phoenix, AZ: 9141 SF retail strip on ½ ac corner lot across the street from Frys supermarket. 100% NNN leased by 6 tenants. NOI $147K/yr. $1.885M. 7.82% cap.
4. Pizza restaurant in Fayetteville, GA: 3092 SF restaurant on a major artery in a fast growing and high income (AHI over $89K/yr) Atlanta suburb. 10 yrs absolute NNN lease by a franchisee with 29 locations. NOI $70K/yr. Only $756K. 9.25% cap.
5. Joe’s Crab Shack Seafood restaurant in Sanborn, FL: 8050 SF chained restaurant on 1.77 acres at the entrance to 120-store upscale Seminole Towne Center Mall just off I-4 in the fast growing North Orlando. 20 yrs NNN lease with 19 yrs remaining by a corp with 120 locations. NOI $262K/yr. with 10% rent bump every 5 yrs. $3.219M. 8.15% cap.
   
   © copyright eFunding Inc. 2009. All rights reserved.

Top 8 Commercial Properties 1-26-09

1. Famous Sam’s Sports Grill restaurant in apache Junction, AZ: 8321 SF chained restaurant built in 2002 on 1.47 acres lot in Phoenix metro. 10 yrs absolute NNN lease to be signed at closing. NOI $138K/yr. $1.9M. 7.26% cap.
2. Retail Showroom in Sunnyvale, CA: 3626 SF retail showroom 1/3 ac lot on El Camino Real. Zoned C2. Ideally for owner/user. $1.699M.
3. Office building in Campbell, CA: 11489 SF 2-story office building with underground parking on the busy Bascom avenue. $2.296M.
4. Rite Aid in Sacramento, CA: 45,575 SF pharmacy on 3.72 acres corner lot on Florin road near hwy 99. 100% NNN leased by Rite Aid. NOI $120K/yr. $1.8M. 6.69% cap. Note: land value is probably worth more than the listing price!
5. Rite Aid Sandy, UT: 13,839 SF pharmacy with drive thru built in 1999 on 1.81 acres corner lot in a the fast growing ((20% since 2000) and affluent (AHI over $96K/yr) Salt Lake City metro. NOI $281K/yr. $3.887M. 7.25% cap.
6. Strip Center in Tempe, AZ: 9671 SF strip mall on .91 acre signalized intersection in Phoenix metro. NOI $98K/yr. $975K. 10.12% cap.
7. Franchised Hotel in Orlando, FL: 160 room franchised hotel near tourist area with over $3M renovation in 2007/2007 and $500K upgrade in 2008. Appraised at $11M. NOI $700K. $7M. 10% cap.
8. CVS pharmacy in Alcoa, TN: 13,225 SF brand new pharmacy on 1.75 acres parcel in Memphis suburb. 25 yrs NNN lease. NOI $278K/yr. $3.628M. 7.66% cap.
   
   © Copyright eFunding, Inc. 2009. All rights reserved.