Wednesday, September 30, 2009

Top 7 Properties Among 299 09/23/09

  1. Panda Express Restaurant in Houston, TX: 2200 SF restaurant constructed in 2008 on .49 acre lot surrounded by many national tenants close to to I-10. 20-years NNN ground lease. Buyer owns the land. 10% rent increases every 5-years. NOI $89K/yr. $1.241M. 7.25% Cap.
  2. Medical Office Building in Vallejo, CA: 22,130 SF office building renovated in 2006 on 1.25 acres of land recently gone through major improvements. 100% leased to three tenants: Davita Corporation, Timec Constructors and Catholic Social Services. NOI $272K/yr. $3.4M. 8% Cap.
  3. Shopping Center in Fountain Hills, AZ: 16,276 SF newly constructed shopping center on 1.17 acres of parcel at active signalized intersection in growing (29.71%) prosperous (AHI $107K/yr) Phoenix suburbs. Leased by strong mix of local/national credit tenants. NOI $328K/yr. $3.650M. 9% Cap.
  4. Bank Owned Retail Center in Escondido, CA: 6650 SF five-unit retail center on .29 acre pad with excellent visibility. NOI $79K/yr. $930K. 8.5% Cap.
  5. Lexington Hotel in Phoenix, AZ: 107-room 8-stories Lexington Hotel in a prime area near downtown, convention center, sports arena and airport. NOI $613K/yr. $7.2M. 8.51% Cap.
  6. Shopping Center in Redlands, CA: 13,490 SF attractive shopping center built in 2004 consisting of two buildings on 1.23 acres of land at major retail corridor near Fwy-10. 100% NNN leased. NOI $240K/yr. $3.125M. 7.68% Cap.
  7. Retail Building in San Bernardino, CA: 3100 SF gorgeous recently constructed retail building on .63 acre lot. 100% leased by Starbucks Coffee and Euro Deli. NOI $126K/yr. $1.850M. 6.85% Cap.

    © Copyright Transmercial 2009. All rights reserved.

Walgreens, CVS or Rite-Aid: Which Tenant Is Best in 2010?

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 June 2009:

  1. Walgreens ranks #1 with market cap of $34.26 Billion, $62.23 Billion in revenue, 6443 stores and S&P rating of A+.
  2. CVS ranks #2 with market cap of $52 Billion, $93.27 Billion in revenue (CVS revenue alone is less than Walgreens if revenue from its Caremark group is taken out), 6923 stores and S&P rating of BBB+.
  3. Rite Aid ranks #3 with market cap of $1.87 Billion, $26.21 Billion in revenue, 4901 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. So the tenants should do well during tough time and have money to pay rent to landlords.
  2. The drugstore business has a good prospect in the US:
    People are living longer and need more medicine to sustain longevity, e.g. Actonel for osteoporosis, Aricept for Alzheimer’s symptoms. 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 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, vaccine for swine (H1N1) 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.
    There are existing drugs now approved to treat new illnesses and thus increase their sales revenue. For example, Lyrica was originally intended to treat pain caused by nerve damage in people with diabetes. It is now approved by FDA to treat Fibromyalgia which affects 5.8 million Americans per WebMD.
    Big advances in genetics, biology and stem cells research are expected to produce a new class of drugs to treat diabetes, Parkinson’s and various rare genetic disorders. For example the new drug Ilaris from Novartis targets genetic causes of an inherited disorder that there are only 7000 known cases worldwide. However, Novartis hopes to gradually broaden its drugs to a blockbuster drug to more common disorders caused by similar genetics.
    Technology and modern life introduce and require new products, e.g. pregnancy test kits, Lamisil for stronger clearer toe nails, Latisse for longer thicker eyelashes, Premarin for menopausal symptoms, 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 Vicodin for pain management 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, beers and wines, cosmetics, video games, flowers, fragrances, greeting cards, one-hour photos services, etc. As a result, customers buy more than their prescriptions and medicine in these drugstores. Rite Aid sells more 28,000 non-pharmacy items in its stores. 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 37% 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.

Investment Risks


Although the pharmacy business in general is recession-insensitive, there are risks involved in your investment:


1) 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.


2) 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. The actual number of medications is less as the medications with different strengths are counted as different medications. For example, Metformin 500 mg, 850 mg, and 1000 mg are counted as 3 medications. Wal-mart probably makes very little profits on these medications if any. However, the marketing campaign generates a lot of publicity for Wal-mart (Target now offers the same medications for $4 but few people know about it.) Wal-mart hopes to draw customers to its stores with other prescriptions where it has higher profit margins. In an unscientific survey with just one brand-name prescription of Lyrica, this author finds the lowest price at Costco, the highest price at Walgreens and Wal-mart at the middle.


3) Chief Business Correspondent Rick Newman from US World & News Report predicted that Rite Aid might not survive in 2009. It looks like he might be wrong. The study by Audit Integrity gave Rite Aid about a 10.5 percent chance of filing for bankruptcy in 2010. However, its stocks seem to perform quite well in the second half of 2009. For the second quarter ended in August 2009, Rite Aid narrowed its loss to $116 million, compared with a loss of $222 million last year.


4) Drugs are also sold in thousands of supermarkets, Target, and Costco.


5) Many leases in areas with hurricanes and tornados are NNN leases with the exception of roof and structure. So if the roof is damaged, you will have to pay for the expenses.


Among 3 drugstore chains, Walgreens and CVS pharmacies in general have the best locations—at major intersections while Rite Aid has less than premium locations.

1) Walgreens: the 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. The company has been run by executives with proven track records and hires the top graduates from universities. 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 7.5% 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.

2) CVS Pharmacy: 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. The acquisition of Long Drugs appears to be a good one as it CVS does not have any stores in Northern CA and Arizona. Besides, the price also included real estate. 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.

3) Rite-Aid: Rite Aid was founded by Alex Grass (he just passed away on Aug 27, 2009 at the age of 82) and opened its first store in 1962 as “Thrif D Discount Center” in Scranton, Pennsylvania. It officially incorporated as Rite Aid Corporation and went public in 1968. By the time Alex Grass stepped down as the company's chairman and chief executive officer in 1995, Rite Aid was the nation's largest drugstore chain in terms of total stores and No. 2 in terms of revenue. His son, Martin Grass, took over but was ousted in 1999 for overstatement of Rite Aid's earnings in the late 1990s. Rite Aid is now 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 over $5.69 Billion) and is the most leveraged drugstore chain based on its market value. The integration of Brooks and Eckerd did not seem to go well. Revenue from some of these stores went down as much as 20% after they change the sign to Rite Aid. As of 2009, Rite-Aid has over 4900 stores and over $26 Billion in revenues. Compared to Walgreens and CVS, Rite Aid is the weakest financially. 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. Rite Aid has contacted a number of its landlords in 2009 trying to get rent concession to improve the bottom line. In June 2009, Rite Aid successfully completed refinancing $1.9 Billion of its debts. In September 2009 Rite Aid reported a lower loss for the second quarter ended in August 2009.

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 7.5% 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 increase about 1% 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 10.75%% cap rate in 2009. However, among the 3 drug chains, Rite Aid has 10.5% chance of going under in 2010. 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.
  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, e.g. Florida 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 10,000 - 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. There is a chance that these drugstores may not want to renew the lease unless the property is located in a densely-populated area with no vacant land nearby. 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. Many 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 seen only 1 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 2-4% 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 within 5 miles ring. In a small town, it may be the only drug store in town and captures most of the market share. However, if a competitor opens a new location in the area, revenue may be severely affected. These properties are easy to buy now and hard to sell later. In 2009 where the credit market is tight, you may have problems finding a lender 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 7-9% 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, you have 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.



Out of the Box Thinking


If you put too much weigh on the S&P rating of the tenants, you may end up either taking a lot of risks or passing up good opportunities.

  1. Good location should be the key in your decision on which drug store to invest in. It’s often said a lousy business should do well at a great location while the best tenant will fail at a lousy location. A Walgreens store that is closed down later on (yes, Walgreens closed 119 stores in 2007) is still a bad investment even though Walgreens continues paying rent on time. So you don’t want to blindly invest in a drug store simply because it is a Walgreens.
  2. No company is crazy enough to close a profitable location. It does not take a rocket scientist to understand that a financially-weak company like Rite Aid will make every effort to keep a profitable location open. On the other hand, a financially-strong Walgreens will need justifications to keep an unprofitable location open. So how do you determine if a drug store location is profitable or not if the tenant is not required to disclose its profit & loss statement? The answer is you cannot. However, you can make an educated guess based on store’s annual gross revenue is often reported to the landlord as required by the percentage clause in the lease. With the gross revenue, you can determine the rent to income ratio. The lower the ratio, the more likely the store is profitable. For example, if the annual base rent is $250,000 while the store’s gross revenue is $5M then the rent to income ratio is 5%. As a rule of thumb, it’s hard to make a profit if this ratio is more than 8%. So if you see a Rite Aid with 3% rent to income ratio then you know it’s likely a very profitable location. In the event Rite Aid declares bankruptcy, it will keep this location open and continue paying rent. If you see a Rite Aid drug store with 3% rent to income ratio offering 11% cap, chances are it’s a low risk investment with good returns. The weakness of corporate guaranty from Rite Aid is probably not as critical.

    Disclosure: The investment strategy and information presented in this article should not be construed to be formal financial planning advice or the formation of a financial manager/client relationship. The author intends to provide information to the general public based on our recommendations of investment strategies and is not designed to be representative of your own financial needs. Please do not make any decisions about an investment strategy without consulting with a qualified professional.

    To ensure compliance with requirements imposed by IRS Circular 230, we hereby inform you that the U.S. Federal tax advice contained in this article is not intended to be used nor has this article been written to be used, and it cannot be used, by any taxpayer for the purpose: (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. No tax advice is being given by this article for any specific transaction. If you desire advice about any particular transaction, then please consult a professional tax advisor.

    David V. Tran is the Chief Investment Advisor at Transmercial, a commercial real estate brokerage, commercial loan broker, and property management company in San Jose, CA. His website is
    www.transmercial.com. He may be contacted at (408) 288-5500. Transmercial 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.

Tuesday, September 29, 2009

Top 5 Properties 09/22/09

  1. Burger King in Pearland, TX: 2589 SF Burger King built in 2008 on .8 acre outparcel to 1.2M SF Pearland Town Center in suburban Houston. 20 yrs absolute NNN ground lease with percentage rent clause (note: you buy the land while tenant owns the building) from an operator with 35 Burger Kings in TX. NOI $128K/yr. $1.564M. 8.23% cap.
  2. Tuffy Auto center in Bettendorf, IA: 5100 SF franchised auto service center built in 2007 on 1.46 acres pad site to Walgreens in a high income Davenport metro. New 20 yrs NNN lease with guaranty from Tuffy Corp guaranty with 400+ locations. NOI $123K/yr. $1.517M. 8.15% cap.
  3. Walgreens in Pembroke Pines, FL: 13,997 SF drug store built in 1997 on 2.25 acre outparcel to BJ’s Wholesale Club on a major East/West 8-lane artery near I-75 in high income Miami metro. 20 yrs NN lease till 2017. NOI $302K/yr. $4.075M.
  4. Arby’s restaurant in Jacksonville, FL: 3937 SF franchised restaurant on a major retail corridor. New 20 yrs absolute NNN lease from an experienced franchisee with 25 locations. NOI $93K/yr. $1.162M. 8% cap.
  5. Office Building in Orlando, FL: 29,857 SF 4-yr old 2-story class-A office building on 2.5 acres lot on International Drive. 10 yrs NNN leased by Timeshare Only. NOI $536K/yr. 5.9M. 9.1% cap.

    © Copyright Transmercial 2009. All rights reserved.

Monday, September 28, 2009

Top 5 Properties Among 373 09/21/09

AHI: Avg Household income
NOI: Net Oper Income. Income after all expenses paid except mortgage.

  1. Holiday Inn in Henderson, NV: attractive 115-room 3-story Holiday Inn hotel built in 2007 on 2.27 acres of land conveniently located at busy thoroughfare. NOI $775K/yr. $7.750M. 10% Cap.
  2. Medical Office in Montgomery, AL: 4293 SF nice-looking MRI center constructed in 2000 close to Baptist Medical Center. Long NNN corp lease by MQ Associates currently operating 92 centers. NOI $95K/yr. $1.161M. 8.25% Cap.
  3. Apartments in San Jose, CA: 6-units well-maintained multifamily building near VTA Light Rail Station/Hwy-101/880. 100% leased. NOI $53K/yr. $850K. 6.31% Cap.
  4. Medical Building in Lancaster, CA: well-kept 19,793 SF 2-story medical office building across from Antelope Valley Hospital off of Fwy-14. 90% leased. NOI $256K/yr. 3.2M. 8% Cap.
    Seller financing available
  5. Shopping Center in Logan, UT: 74,906 SF shopping center built in 1999 on 9.73 acres of parcel shadow-anchored by Lees Marketplace across from Logan Regional Hospital. NOI $734K/yr. $8.643M. 8.5% Cap.

    © Copyright Transmercial 2009. All rights reserved.

Friday, September 25, 2009

Top 7 Properties 09-18-09

  1. Retail building in Parker, CO: 4917 SF 2-tennant retail building on 1 acre corner lot in an affluent Denver suburb. 100% NNN leased. NOI $108K/yr. $1.35M. 8% cap.
  2. Shopping center in Riverside, CA: 42,289 SF shopping center anchored by Stater Bros grocery store on 4.5 acres corner lot in a growing middle class area. 100% master leased by Stater Bros. NOI $253K/yr. $3.79M. 6.7% cap.
  3. CVS in Bonita Springs, FL: 10514 SF drug store on 1 acre lot on a major artery in a wealthy Fort Myers metro with AHI over $122K/yr. Across street from K-mart and Publix Supermarkets. 100% NNN lease with no landlord responsibilities. Store with over $5M in annual sales. NOI $205K/yr. with rent 7.5% rent increase in each of 5 yr options. $2.45M. 8.38% cap.
  4. Walgreens in Daytona Beach, FL: 14,820 SF Walgreens with double drive-thru built in 2008 on over 2 acres corner lot. 100% rare absolute NNN lease with 24 yrs remaining. NOI $470K/yr. $6.225M. 7.7% cap.
  5. Apartments complex in Hollywood, FL: 38-unit apartments complex on ½ acre lot in a good location East of I-95. All units are upgraded with new kitchens, bathrooms, tile floors, central air conditioning, and new roof. 100% occupied. NOI $235K/yr. $2.8M. 8.4% cap.
  6. Walgreens in Lawrence, MA: 13,390 SF drug store constructed in 1998 on .86 ac lot North of Boston. 100% NN lease with 8.5 yrs left. NOI $343K/yr. $3.475M. 9.85% cap.
  7. Walgreens in Denver, CO: 13,905 SF Walgreens built in 1996 on a corner lot on a major artery. Excellent demographics with over 400K residents within 5 mile ring, AHI over $84K/yr within 1 mile ring. Store with strong annual revenue of $7.5M. 100% NN lease. NOI $363K/yr. $4.27M. Strong 8.5% cap.

    © Copyright Transmercial 2009. All rights reserved.

Thursday, September 24, 2009

Top 8 Proeprties 09-17-09

When is the best time to buyer commercial real estate?
Michael Bull, President of Bull Realty will answer this question. He echoes the same advice as Transmercial. He explains it in term of economic cycles. Please click
here to read it from my blog.

  1. Jiffy Lube in Pearland, TX: 4155 SF J1-yr old Jiffy Lube on 2 acres lot in a high-growth high-income (AHI 86K/yr) Houston suburb. 20 yrs absolute NNN lease from a major franchisee with 110 units in 3 states. NOI $151K/yr with 10% rent bump each 4 yrs. Price just reduced to $1.733M. 8.75% cap.
  2. Applebee’s in Mission, KS: 5026 SF franchised restaurant built in 1997 on 1.4 acres parcel in a high income suburban Kansas City. Long term absolute NNN lease. NOI $163K/yr with 2% annual rent increase. $1.92M. 8.5% cap.
  3. Just Brakes in Tampa, FL: 3800 SF car service center built in 2008 on ½ ac lot. 100% NNN leased with guaranty from a corp with over 150 stores. NOI $102K/yr. $1.2M. 8.5% cap.
  4. CVS in Marietta, GA: brand new 12,900 SF drug store on 2 acres corner lot in a very wealthy (AHI $153K/yr) Atlanta suburb. 25 yrs NNN corp lease with no landlord responsibilities. NOI $351K/yr. $4.68M. 7.5% cap.
  5. Rite Aid in Marietta, GA: 13,813 SF drug store built in 2003 on 1.5 acres corner lot on a major artery in a high income suburban Atlanta. Across the street from Publix Supermarkets anchored shopping center. 100% NNN leased till 2023. NOI $377K/yr. $3.678M. 10.25% cap.
  6. Apartments Complex in Dallas, TX: 272-unit apartments complex built in 1985 on 7.77 acres lot. 82% occupied. NOI $982K/yr. Price reduced to $4.75M. 9% cap. GRM of 2.23. Just over $17K/unit!
  7. Family Dollar store in Arlington, TX: 9180 SF single-tenant store built in 2005 on 1 acres lot in a fast growth, high income Dallas metro. 10 yrs NN lease with 6 yrs remaining. NOI $75K/yr. $915K. 8.3% cap. Recession-insensitive tenant.
  8. Rite Aid in Concord, NC: 10,900 SF drug store built in 2002 on .94 acre outparcel to a Food Lion Grocery anchored shopping center. Great demographics: fast growth, high income (AHI $92K/yr) Charlotte metro. 100% NNN leased till 2022. NOI $227K/yr. $2.169M. 10.5% cap. Note: with 30% down, this property offer 17.5% total return!

    © Copyright Transmercial 2009. All rights reserved.

Wednesday, September 23, 2009

Top 8 Properties of 09-16-09

AHI: Avg Household income
NOI: Net Oper Income. Income after all expenses paid except mortgage.

  1. Office Building in Houston, TX: 34,805 SF Class-A office building constructed in 2005 on 2.39 acres of land with excellent Freeway visibility. 100% NNN leased. NOI $402K/yr. $4.356M. 9.25% Cap.
  2. Kragen Auto Parts in Riverside, CA: 6000 SF recently constructed retail building on .40 acre lot at signalized intersection. 100% NNN corp lease. NOI $139K/yr. $2.2M. 6.35% Cap.
  3. Rite Aid Pharmacy in Alpharetta, GA: 13,813 SF pharmacy built in 2004 on 1.75 acres of land across from Publix Anchored Center in fast growing (64.06%) affluent (AHI $113K/yr) Atlanta metro. 100% absolute NNN corp lease with 16 years remaining on original lease. NOI $312K/yr. $3.050M. 10.25% Cap.
  4. Medical Office in Glendale, AZ: attractive 6440 SF Apollo Animal hospital along busy thoroughfare in-filled location. 10-years NNN corp lease. NOI $148K/yr. $1.650M. 8.5% Cap.
    National tenant with 123 locations
    Tenant has occupied property for 23-years
  5. Shopping Center in Santa Clarita, CA: 20,662 SF mature shopping center located at corner location near Hwy-126. 100% leased by 7 tenants. NOI $251K/yr. $3.575M. 7.03% Cap.
  6. Tuffy Auto Center in Omaha, NE: 3900 SF 2-yrs old retail building on .63 acre lot adjacent to new Super Target across from Wal-Mart Supercenter in growing (129.34%) well-off (AHI $109K/yr) neighborhood. 100% NNN leased. NOI $111K/yr. $1.369M. 8.15% Cap.
  7. Jiffy Lube in Omaha, NE: 3113 SF recently constructed retail building on .32 acre pad at hard corner location off of I-80. New 20-years absolute NNN lease with 10% rent increases every 5-yrs. NOI $74K/yr. $926K. 8% Cap. Excellent for 1st time investor.
  8. Petco in Poulsbo, WA: 15,000 SF retail building on 1.70 acres of parcel adjoining to multiple national retailers off of I-3 in wealthy (AHI $90K/yr) northwest of Seattle. 10-years NNN corp lease. NOI $352K/yr. $4.272M. 8.25% Cap.

    © Copyright Transmercial 2009. All rights reserved.

Tuesday, September 22, 2009

Top 6 Properties 09-15-09

  1. Shopping Center in Austell, GA: 9000 SF 3-yr old strip mall on 1.25 acres outparcel to Home Depot in Atlanta suburb. 100% NNN leased by 4 tenants. NOI $256K/yr. Price reduced from $2.8M to $2.6M. 9.84% cap.
  2. Strip Mall in Temecula, CA: 13,630 SF strip mall constructed in 2001 in front of 1.1 Million squarefeet Promenade regional mall. 100% NNN leased by 3 tenants. NOI $357K/yr. $4.325M. 8.25% cap.
  3. Retail Building in Sacramento, CA: 4800 SF retail building on ½ acre corner lot. 100% NNN leased by 7-11. NOI $81K/yr. Price reduced from $1.125M to $1.025M. 8% cap.
  4. Shopping Center in West Covina, CA: 16,450 SF shopping center in a densely-populated city with over 500K residents within 5 miles ring. 100% NNN leased by 13 tenants. NOI $258K/yr. Price reduced from $3.795M to $3.6M. 7.19% cap.
  5. Walgreens in Warr Acres, OK: 13,305 SF drug store on 1.2 acres corner lot in a stable suburban Oklahoma city. New roof. 100% NN leased till 2016. NOI $185K/yr. $2.04M. 9.1% cap.
  6. Petco in Union Gap, WA: 15,373 SF single-tenant retail building developed in 2006 on 1.33 acres parcel in a prime commercial corridor near Valley Mall in Yakima metro. 10 yrs NNN lease till 2016 by PETCO Animal Supplies Stores, Inc. NOI $308K/yr with 8.2% rent bump in 2012. $3.688M. 8.37% cap.

    © Copyright Transmercial 2009. All rights reserved.

Monday, September 21, 2009

Top 6 Walgreens in the US

These are the best Walgreens based on cap, location, age, AHI, rarity, population size, potential for appreciation, and more. Most of the Walgreens below except two offer 8% cap mainly because they are in prime locations. In a normal market, they could potentially become 6% cap which mean potential appreciation.

  1. Walgreens in Renton, WA: 14,820 SF newly constructed Walgreens on 1.13 acres corner lot in growing and high income (AHI $88K/yr) Seattle metro near Sea-Tac airport. NOI $550K/yr. $7.382M. 7.45% cap.
    Note: when this property was on the market about 2 weeks ago, it offered 7.6% cap. The price has gone up over $100K! This is the first property that I am aware of among all of my top 10 properties whose price has gone up instead of typical price reduction. It’s probably the beginning of the end of price reduction.
    Seattle metro is one of the most stable if not the most stable real estate markets in the US. There are few properties for sale here.
  2. Walgreens in Daytona Beach, FL: 14,820 SF Walgreens with double drive-thru built in 2008 on over 2 acres corner lot. 100% rare absolute NNN lease with 24 yrs remaining. NOI $470K/yr. $6.225M. 7.7% cap.
  3. Walgreens in Orange Park, FL: 15,420 SF Walgreens built in 2002 on 1.43 acres corner lot in prime commercial corridor in a fast growing (59% since 2000) and affluent (AHI $94K/yr) Jacksonville suburb. Surrounded by Target, Stein Mart, Michaels, CVS, Kohls, Home Depot, Wal-Mart, and many more. 20 yrs NN lease with 12 yrs left. NOI $342K/yr. $4.208M. 8.15% cap.
  4. Walgreens in Parker, CO: 14,450 SF 1-yr old drug store on 2.5 acres lot near I-25 in a fast growing (43% since 2000) and affluent (AHI $115K/yr) Denver suburb. NOI $445K/yr. $5.934M. 7.5% cap.
  5. Walgreens in Alexandria, VA: 14,469 SF Walgreens built in 2008 on 2 acres lot on a major artery in a upper middle class (AHI $109K/yr within 5 miles ring) Washington DC with high barrier to entry. 25 yrs NNN lease. NOI $595K/yr. $7.933M. 7.5% cap.
  6. Walgreens in Denver, CO: 13,905 SF Walgreens built in 1996 on a corner lot on a major artery. Excellent demographics with over 400K residents within 5 mile ring, AHI over 84K/yr within 1 mile ring. Store with strong annual revenue of $7.5M. 100% NN lease. NOI $363K/yr. $4.27M. Strong 8.5% cap.

Top 7 Properties Among 350 09-14-09

  1. Rite Aid in Raleigh, NC: 10,908 SF drug store built in 2001 on 2.7 acres hard corner lot with 2 points of access. Across from Food Lion supermarket anchored shopping center in a high-growth (53% from 2000-2008), high income (AHI $73K/yr) part of Raleigh. Great location with no competitions within 3 miles radius. 100% NNN leased till 2022. NOI $284K/yr. $2.71M. 10.5% cap.
  2. Starbucks in Rio Rancho, NM: 2000 SF Starbucks Coffee built in 2006 on ½ acre across from Wal-mart Supercenter in a high-growth Albuquerque suburb. 100% NNN leased till 2016. NOI $85K/yr with 10% rent bump every 5 yrs. $1.137M. 7.5% cap.
  3. Advance Auto Parts in Commerce City, CO: 7000 SF auto parts store on over 1 acre lot in Denver metro. opened in Dec 2007 with 15 yrs NNN lease. NOI $133K/yr. $1.715M. 7.75% cap.
  4. Strip Mall in Phoenix, AZ: 7534 SF retail center built in 2005 on 1 acre lot. Shadow anchored by Walgreens and Autozone. 100% NNN leased by 6 tenants with 3 being national tenants. NOI $161K/yr. $1.795M. 9% cap.
  5. Tuffy Auto Service Center in Fort Myers Beach, FL: 7200 SF franchised automotive center built in 2001 in a high income city with AHI over $93K/yr. 100% NNN corp lease. NOI $141K/yr. Price reduced to $1.275M. 11% cap.
  6. Apartments in Pasadena, TX: 362 unit apartments complex on 9.5 acres lot near Southmore Medical Center in Houston metro. 90% occupied. NOI $962K/yr. $9.65M. 9.97% cap. Low Gross Rent Multiplier of 3.67%.
  7. Storage Facility in Carson City, NV: 67,000 SF storage facility opened in 1999 with a commercial building and a 2-br apartment for on-site manager. 95% occupied. NOI $249K/yr. $2.9M. 8.6% cap.

    © Copyright Transmercial 2009. All rights reserved.

Friday, September 18, 2009

Top 6 Properties 09-11-09

Advisory:
In the last 12 months, you often see “price reduction” on the listings. Today, Transmercial notices price increases in 2 properties on Transmercial’s “Top 10 properties” list:
A 146,948 SF shopping center in Las Vegas, the price has increased from $7.9M to $8.5M.
A Walgreens in Renton, WA, the price has gone up from $7.24M to $7.382M.
Transmercial sees more evidence of a momentum shift from seller market to a normal market. There are also a lot more multiple offers now compared with 6 months ago. As we approach the end of the year, there will be more buyers who have sit on the sidelines and you probably won’t see better prices.

  1. Burger King in Houston, TX: 2626 SF fast-food restaurant on a corner lot. 20 yrs absolute NNN lease by a franchisee with 50 locations. NOI $103K/yr. $1.34M. 7.75% cap.
  2. Michaels Store in Mt. View, CA: 21,579 SF single-tenant retail store completely renovated in 2007 on 1.25 acres lot. In the heart of affluent Silicon Valley and just off Hwy 101. 100% NNN lease with over 8 yrs left. NOI $513K/yr. Price reduced to $6.95M. 7.38% cap. Buyer to assume $5.3M loan at 6.5% interest.
  3. Apartments in Inglewood, CA: 25-unit apartments complex across from Centinela Medical Center. New windows and electrical systems. NOI $218K/yr. $2.75M. 8.5 GRM at current rent. Buyer to assume $2.088M loan at low 5.71% interest rate.
  4. Shopping Plaza in Westminster, CO: 56,846 SF grocery anchored neighborhood center on a corner lot in Denver metro. Beautifully redeveloped in 2008. 96% NNN leased. NOI $800K. $10M. 8% cap.
  5. Strip Mall in Romeoville, IL: 11,167 SF strip center built in 2004 on 1.44 acres lot in a pro-growth & high-income Chicago suburb. 100% leased by 6 tenants. NOI $167K/yr. $1.9M. 8.78% cap.
  6. Joe’s Crab Shack in Houston, TX: 8366 SF franchised seafood restaurant built in 1999 on 3.14 acres lot. 20 yrs absolute corp NNN lease with 18 yrs remaining. NOI $253K/yr with 10% rent increase every 5 yrs. Price reduced to $2.535M. 10% cap.

    © Copyright Transmercial 2009. All rights reserved.

Thursday, September 17, 2009

Top 5 Properties 09/10/09

  1. Holiday Express Hotel in Brentwood, CA: 50-unit hotel built in 1995 on 1.37 acres lot in a booming (86% growth since 2000) and high income (AHI $85K/yr) San Fran Bay Area. $113/day avg rate and 74% avg occupancy rate. NOI $558K/yr. Price reduced to $4.995M. 13% cap.
  2. Retail Strip Center in Fort Worth, TX: 9961 SF beautiful strip center built in 2007 on 1 acre parcel in a high growth area near I-35. 100% NNN leased by 5 tenants. NOI $177K/yr. $1.775M. 9.75% cap.
  3. Arby’s restaurant in Austell, GA: 3365 SF restaurant on .9 ac corner outparcel to a shopping center in Atlanta’s suburb. 100% NNN lease with guaranty by Wendys (NYSE: WEN) till 2017. Store with strong sales. NOI $75K/yr. $937K. 8% cap.
  4. CVS Pharmacy in Kennesaw, GA: 12,608 SF drug store built in 1994 on 1.37 acres lot in a fast growing (28%) and high income (AHI $89K/yr) Atlanta suburb. NOI $174K/yr. Store with very low rent/revenue ratio of 3.8%, i.e. profitable location. 100% NNN lease with 6 yrs left. Lease options with rent increases. $2.05M. 8.52% cap.
  5. Petco in Darlene Prairie, MO: 15,000 SF single-tenant retail store on an outparcel to a 400,000 SF power center anchored by Target, JC Penney, Shop 'n Save and Wehrenberg Theatre in Saint Louis metro. 10 yrs NNN corp lease. NOI $252K/yr. $2.975M with rent bump. $2.975M. 8.5% cap. Recession insensitive tenant.

    © Copyright Transmercial 2009. All rights reserved.

When Is The Best Time To Buy Commercial Real Estate?


Real Estate Cycles


Historically, commercial real estate values have been cyclical and will continue to be so in the future. The availability and cost of financing is a key component of these cycles. Available capital is affected by the economy, interest rates, supply and demand, and the perception of the market. Real estate prices fluctuate as these factors exert their influence.

To determine the best time to buy, consider where we are in the cycle. Then, see how your particular business or personal financial goals can be strengthened by considering the effects of the cycles.

There are four distinct phases to the commercial real estate cycle: Recession, Recovery, Expansion and Contraction.


  1. Recession: The Recession Phase follows a market contraction, when the availability of financing become scarce or expensive and property prices have fallen. Properties experience higher vacancies and owners have difficulty refinancing, selling or leasing. Foreclosures increase and property sellers become motivated. Prices can fall below replacement costs, resulting in many opportunities for those with the liquidity and fortitude to take advantage of the market weakness. This is the absolute best time to buy.
  2. Recovery: In The Recovery Phase, the market is improving and prices begin to recover, although some buyers are still hesitant to proceed. More tenants enter the market and property owners refinance as affordable financing becomes available. Owners tend to improve their property and work to maximize rental rates. Prices are increasing. This is a very good time to buy.
  3. Expansion: During the Expansion Phase, the real estate market is progressing and expanding and equity investors are plentiful. Financing is readily available and the price of real estate may increase more than seen in previous history. Vacancies are at their lowest point and there is a general sense of well-being, prosperity and abundance. Everyone is talking about buying real estate. This is the time to sell.
  4. Contraction: The Contraction Phase is when vacancies are increasing and prices begin to fall from the peaks of the Expansion Phase. The market has become oversaturated and financing is becoming more difficult or expensive. Investors begin to withdraw from the market as vacancy and delinquency rates rise and prices decline. Buying and selling decisions should be based on need, prime property availability and specific sub-market and individual opportunities.


The phases of the real estate cycle are always in the same order; the only variables are the depth and duration of each phase. By determining the timing of phases along with your own personal and business capability and goals, you can make the best decisions.


As a real estate investor, the most important question is, "When is the best time to buy?" This is when we realize we are either savvy decision makers or merely “one of the herd”. If the market is in the Recession Phase, the stage is set to reap the absolute highest profits by buying at a time when prices are at their lowest. When the market is in the Recovery Phase, it’s still a good time to expand holdings and find deals while building long term wealth.

We have all heard the phrase, “Buy low and sell high.” The best time to buy low is when the cycle is in the Recession Phase, when the lowest prices are available. In this phase, prices can be negotiated and many prime locations are available. The time to sell is during the Expansion Phase, when buyers can easily obtain financing and the market continues to expand. One way to think about this is when everyone is talking about buying, you should be selling. When everyone is talking about the doom and gloom in the Recession Phase, you should be buying.


The challenge with this strategy is that it goes against our basic instincts, even though logic and history dictate otherwise. Our “herd instinct” is affected by the people around us, the media and our resulting emotions. Although we understand that we should not follow the herd mentality, logic and emotion are in conflict. Unfortunately for most, emotion will usually rule over logic. This human tendency creates opportunities for the more logical and less emotional investors.


In this time of uncertainty, one thing that we can be certain of is that that cycles will continue to repeat. History has proven that those with the emotional fortitude and the financial ability to take advantage of the cycles will reap tremendous rewards.

Michael Bull, CCIM
President of Bull Realty

Wednesday, September 16, 2009

Top 7 Properties 09/09/09

  1. Apartments in Dallas, TX: 272-unit well-maintained apartments complex built in 1985 on 7.7 acres lot with swimming pools, 2 playgrounds, clubhouses. 82% occupied. $5.15M. Only $19K/unit!
  2. Medical Office building in Charlotte, NC: 15,000 SF office building on 2.36 acres lot across street from Eastland Mall. 100% absolute NNN lease with 7 yrs left by CSL Plasma, Inc., which is 100% owned by CSL Limited, a multi-billion dollar biopharmaceutical company specializing in Flu vaccines. NOI $211K/yr. $2.495M. 8.46% cap.
  3. Automotive Repair Center in Antioch, CA: 19,380 SF multi-tenant automotive center built in 2003 on 1.5 acres lot. 100% NNN leased by 6 national/regional tenants. NOI $247K/yr. $3.018M. 8.2% cap.
  4. Advance Auto Parts in Thornwood, CO: 7000 SF single-tenant 1-yr old retail building on 1.28 acres signalized corner lot in Denver metro. 15 yrs NNN lease. NOI $140K/yr. $1.809M. 7.75% cap. Recession insensitive tenant.
  5. Medical Plaza in Northridge, CA: 34,275 SF class-A medical 3-story office building on 1.69 acres parcel in a high-income (AHI $97K/yr) city in Los Angeles. 100% NNN leased. NOI $795K/yr. $10.65M. 7.47% cap. Buyer to assume $5.95M loan at low 5.65% interest.
  6. Hotel/Motel in Keizer, OR: 86-room hotel/motel built in 1998 on 3.65 acres lot in Salem metro. NOI $467K/yr. Appraised at $8.2M in Aug. 2008. $5.8M. 8.06% cap.
  7. O’Reilly Auto Parts in Irving, TX: 7225 SF newly built auto parts store on .82 ac parcel in Dallas metro. 20 yrs NNN lease. NOI $113K/yr. $1.505M. 7.56% cap.

    © Copyright Transmercial 2009. All rights reserved.

Tuesday, September 15, 2009

Top 5 Properties Among 349 on 9/8/09

  1. Walgreens in Holy Springs, NC: 14,564 SF newly built drug store on 1.98 acres corner lot across street from Harris Teeter Supermarkets anchored shopping center in a fast growing and wealthy Raleigh suburb. New 75 yrs NNN lease. NOI $347K/yr. $4.63M. 7.5% cap.
  2. Shopping Center in Houston, TX: 84,162 SF shopping center built in 1998 on 3.56 acres lot with frontage on an 8-lane I-35. Anchored by Conn’s Appliance. 100% NNN leased by 7 tenants: 5 of them national/regional. NOI $572K/yr. $5.7M. 10% cap.
  3. Metro Surgery Center in Phoenix, AZ: 13,835 SF surgery center on ¾ ac parcel near Metrocenter Mall. 100% NNN leased till 2016 and guaranteed by United Surgical Partners International with revenue over $1.6B in 2008. NOI $280K/yr with 3% annual rent bump. $3.275M. 8.56% cap.
  4. Checker’s Drive-In in Conyers, GA: 736 SF Checker’s drive-in franchised restaurant on .43 ac lot just off I-20 off-ramp in Atlanta metro. 20 yrs NNN ground lease (land is for sale) by the largest franchisee. NOI $69K/yr with 20% rent increase in yr 11. $862K. 8% cap.
  5. Strip Center in Chicago, IL: 10,978 SF strip mall built in 1999 on a corner lot. 100% NNN leased by Citibank, Cricket Cell Phone and MS Beauty Supply. NOI $194K/yr. $2.1M. 9.25% cap.

    © Copyright Transmercial 2009. All rights reserved.

Monday, September 14, 2009

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.


If you are interested on a particular property and would like additional information, i.e. a brochure, please email to maria@transmercial.com. It’s good idea to provide Maria with:


The date the property was selected (not posted date.) This is on the subject of the post.
Name of the property, e.g. Walgreens in Dallas, TX.


You will notice that the properties are posted 1 week after the date they are selected. The reason for this 1 week delay is we don’t want other companies to take advantage of our research work. If you are an investor and would like to receive the list daily without one week delay, we invite you to join Transmercial investors club. The daily list of best properties is emailed to members by 6PM PST, Monday-Friday. The email also contains a 1-page flyer for each selected properties with picture, address, and a brief description about the properties.


Membership to Transmercial investors club is FREE. Click here for details. Don’t worry; there are absolutely no obligations of anything from you to us for being a member. Of course, we hope that you like our work and will eventually ask us to represent you. However, it’s all up to you as you have no contractual obligations to us for anything.

Friday, September 11, 2009

Top 5 Properties 09-04-09

  1. Walgreens in Renton, WA: 14,820 SF newly-built drug store on 1.13 acres lot at a signalized corner in a growing and high income (AHI $88K/ within 5 miles ring) Seattle metro. 20 yrs NNN lease with no landlord responsibilities. NOI $550K/yr. $7.24M. 7.5% cap.
  2. KFC in Fort Worth, TX: 2084 SF newly-built restaurant on ½ acre lot on a major artery. 20 yrs absolute NNN lease from a franchisee with 57 locations. NOI $97K/yr with 10% rent bump every 5 yrs. $1.175M. 8.25% cap.
  3. Medical Office Building in Phoenix, AZ: 28,183 SF medical office building on 4 acres lot near I-17. 89% leased by a variety of healthcare businesses, including primary care, specialty medical, urgent care, dental, chiropractic and optical-care services. NOI $333K/yr. $3.7M. 9% cap.
  4. Medical Office Building Las Vegas, NV: 15,488 SF medical office building developed in 2000 on .95 ac parcel in a high income part of the city. 100% NNN leased by 4 medical tenants. NOI $379K/yr. $4.395M. 8.6% cap.
  5. Neighborhood center in Phoenix, AZ: 75,233 SF 13-unit neighborhood center built in 2006 on 8.7 acres corner lot anchored by 55,000 SF Food City supermarket. 95% NNN leased. Proforma NOI $1.1M. $12.79M. 9% cap.

    © Copyright Transmercial 2009. All rights reserved.

Thursday, September 10, 2009

Top 7 Properties of 09-03-09

  1. KFC In Fort Worth, TX: 2730 SF 10-yrs old restaurant on ¾ ac Home Depot outparcel at I-820 off-ramp. 20 yrs absolute NNN lease by a franchisee with 57 locations. NOI $133K/yr. with 10% rent bump every 5 yrs. $1.618M. 8.25% cap.
  2. Rite Aid in Sugar Hill, GA: 13,824 SF drug store built in 2003 on 2.66 acres lot in a growing Atlanta suburb. 100% long term NNN lease. NOI $314K/yr. $3.3M. 9.5% cap.
  3. Medical Office building in San Leandro, CA: 7500 SF single-tenant medical office building. 100% leased by Stars Behavior Health Group with 12 outpatients centers in CA. NOI $82K/yr. $1.1M. 7.5% cap.
  4. Medical Imaging Center in Jacksonville, FL: 11,114 SF imaging center next door to St Vincent’s Hospital. New 7 yrs NNN lease at closing. NOI $168K/yr. $2.1M. 8% cap. Recession-insensitive tenant.
  5. Medical Center in Federal Way, WA: 17,079 SF medical office building on 2.74 acres lot in a stable and high income Seattle metro. 100% NNN leased by 3 tenants. NOI $270K/yr. $3.25M. 7.73% cap.
  6. Shopping Center in Issaquah, WA: 40,707 SF shopping center on over 6 acres lot in an affluent city (AHI $128K within 5 miles ring) in Seattle metro. Current NOI $382K/yr. $4.2M. 9% cap.
  7. Shopping center in Renton, WA: 29,014 SF shopping center on 2.2 acres parcel in a growing Seattle suburb. 92% leased. NOI $583K/yr. 7.4M. 8% cap.

    © copyright Transmercial 2009. All rights reserved.

Top 8 Properties 09/02/09

  1. Office Depot in East Palo Alto, CA: 30,978 SF 10-yrs old Office Depot building as part of a power center anchored by Ikea, Home Depot, Sports Authority, Nordstrom Rack, Best Buy, and Mi Pueblo Grocery. Located in the heart of Silicon Valley with visibility from Hwy 101, excellent demographics (AHI $157K/yr within 3 miles radius), and high barrier to entry. 10 yrs absolute NNN lease with corp guaranty. NOI $898K/yr. Price reduced to $9.988M. 9% cap.
  2. Tire Plus Automotive in Oklahoma, OK: 10,118 SF new automotive center in the suburb of Oklahoma city. 15 yrs NNN lease with corp guaranty from Bridgestone/Firestone (BBB+ Credit Rating). NOI $212K/yr with 10% rent bump every 5 yrs. $2.655M. 8% cap. Recession insensitive tenant.
  3. Shopping Center in Phoenix, AZ: 17,055 SF inline shopping center built in 1990 on 1.45 ac lot. Shadow anchored by Fry’s Grocery (owned by Kroger). 100% NNN leased by 10 tenants, 5 of them brand name. NOI $258K/yr. Strong demographics area. Price reduced from $3.675M to $3M. 8.6% cap. Buyer to assume $2.2M loan at favorable rate of 6.25% fixed rate till 2016.
  4. Strip Mall in Phoenix, AZ: 13,797 SF upscale strip center built in 2005 in a high income area with AHI over $74K/yr. 100% NNN leased by 6 tenants. NOI $257K/yr. $3.2M. 8.05% cap.
  5. Applebee’s in Kansas city, MO: 5285 SF restaurant built in 1996 on 1.7 acres lot across the street from Wal-mart supercenter near I-35 off-ramp. Surrounded by Super Target, Kohl's, and Home Depot, Bed Bath & Beyond, TJ Maxx, PetSmart, Office Depot, and Michael's. Fast growing (70%) and high income (AHI $73K/yr) area. Long term NNN lease. NOI $183K/yr. $2.16M. 8.5% cap.
  6. Walgreens in Clovis, CA: 14,490 SF drug store built in 2001 on a corner lot next to Save Mart Supermarket in fast growth and high income Fresno metro. 100% NN leased till 2021. NOI $310K/yr. $4.134M. 7.5% cap.
  7. Apartments in Spokane, WA: 13-unit apartments complex in a wealthy & quiet area (AHI $95K/yr) with city views. 99% occupied. $925K.
  8. Medical Office Building in San Clemente, CA: 35,214 SF 25-unit medical office building across the street from Saddleback memorial medical center in a affluent coastal city with AHI over $133K/yr. 90% leased. NOI $612K/yr. $8.288M. 7.39% cap.

    © Copyright Transmercial 2009. All rights reserved.

Top 9 Properties 09-01-09

  1. Shopping center in Moreno Valley, CA: 29,623 SF new shopping center in a boom town. Anchored by Fresh and Easy Neighborhood Market. 95% NNN leased. NOI $627K/yr. $7.85M. 8% cap.
  2. Shopping Center in San Jose, CA: rare shopping center on over 3 acres corner lot in high income area (AHI over $113K/yr). 100% NNN leased by 15 tenants with below market rent. NOI $536K/yr. $8.5M. 6.3% cap.
  3. Motel in Sunnyvale, CA: 104 unit hotel in the middle of Silicon Valley. Across the street from the former Sunnyvale Town Center. $5.995M.
  4. Shopping Plaza in Winthrop Harbor, IL: 60,980 SF retail plaza on 4.5 acres parcel North of Chicago. Anchored by a grocery store. 100% occupied by 21 tenants. NOI $396K/yr. $4.07M. 9.75% cap.
  5. Tuffy Auto in Omaha, NE: 3900 SF Tuffy Auto built in 2007 on .63 ac outparcel to Super Target in a fast growing & wealthy area with AHI over $109K/yr. 20 yrs NNN lease with corp (235 stores in 20 states) guaranty. NOI $111K/yr. $1.369M. 8.15% cap.
  6. Apartments in Hollywood, FL: 38-unit well-maintained apartments in a high income area. 97% occupied. NOI $251K/yr. $2.8M. 9% cap.
  7. Shopping Center in Vancouver, WA: 25,472 SF retail center in a stable city. Adjacent to Walgreens, Safeway. 100% leased. NOI $460K/yr. $5.12M. 9.02% cap.
  8. Shopping Center in San Antonio, TX: 32,623 SF upscale class-A shopping center built in 2007 on 3 acres lot in a wealthy part of San Antonio (AHI over $112K/yr). 87% NNN leased. NOI $590K/yr. $6.5M. 9.08% cap.
  9. Office Building in Austin TX: 18,444 SF 5-yrs old high-image office building on 2 acres lot in a affluent part of town with AHI over $97K/yr. Anchored by Citibank. 97% occupied. NOI $304K/yr. $3.675M. 8.28% cap.

    © copyright Transmercial 2009. All rights reserved.

Tuesday, September 8, 2009

Top 10 Properties Among 350+ 08-31-09

AHI: Avg Household Income

  1. Walgreens in Houston, TX: 14,820 SF brand new drug store on 1.68 acres lot in a booming area with Hwy frontage. 20 yrs NNN lease. NOI $316K/yr. $4.358M. 7.25% cap.
  2. Medical Building in Myrtle Beach, SC: 30,000 SF class-A medical office building constructed in 2001 next to South Strand Ambulatory Care Center in a growing coastal city. 65% lease with actual NOI of $284K/yr. $3.65M. 7.8% actual cap. Upside potential when 100% leased.
  3. Apartments in Irving, TX: 94-unit 2-story apartment complex built in 1980 on 2.75 acres lot in a good area in Dallas metro. NOI $307K/yr. $3.825M. 8.05% cap. Just over $40K/unit.
  4. Office Building in Fort Lauderdale, FL: 18,000 SF story office building on a highly visible location in a wealthy area with AHI over $118K/yr. 100% leased with 7 yrs remaining by Merrill Lynch, a subsidiary of Bank of America with strong S&P rating of A. NOI $350K/yr. $4.375M. 8.04% cap.
  5. Walgreens in Orange Park, FL: 15,420 SF drug store built in 2002 on 1.43 acres hard corner lot in a fast growing upper middle-class Jacksonville suburb. 100% NN leased. NOI $343K/yr. $4.208M. 8.15% cap.
  6. Joe’s Crab Shack in Fairview Heights, IL: 7076 SF franchised seafood restaurant with 120 locations in 28 states. On ¾ acre parcel near I-64 and St Clair Square Mall in St Louis suburb. 20 yrs NNN corp lease. NOI $117K/yr with 10% rent bump every 5 yrs. Price reduced to $1.178M. 10% cap.
  7. Shopping Center in Pasadena, TX: 18,940 SF strip center on a corner lot in Houston metro. Anchored by Sherwin Williams Paint. 100% NNN leased by 6 tenants. NOI $201K/yr. $2.2M. 9.12% cap.
  8. Walgreens in Daytona Beach, FL: 13,905 SF drug store on 1.56 acres parcel. 100% NN lease with 8 yrs remaining. NOI $226K/yr. $2.65M. 8.54% cap.
  9. Days Inn in San Bernardino, CA: 50-unit motel near I-10 exit in a growing and high income area. NOI $504K/yr. $4.2M. 12% cap.
  10. AppleBee’s in Lewisville, TX: 5911 SF franchised restaurant built in 2005 on 1.25 acres lot at the entrance to 1 Million SF Vista Ridge Mall just off I-35 exit. 100% NNN lease by an operator with 27 stores. NOI $244K/yr. $2.88M. 8.5% cap.

    © Copyright Transmercial 2009. All rights reserved.

Friday, September 4, 2009

Top 10 Properties Among 300+ 08/28/09

  1. Christian Brothers Auto in Lewisville, TX: 4971 SF 1-yr old automotive center in a high-income (AHI $98K/yr) Dallas metro. 15 yrs NNN corp lease with no landlord responsibilities. NOI $157K/yr with 1.5% annual rent bump. $1.937M. 8.12% cap.
  2. Rite Aid in Bedford, NH: 14,975 SF drug store on 2.3 acres lot in a high income New England area. New 20 yrs absolute NNN lease. NOI $316K/yr. $3.515M. 9% cap.
  3. Office Building in Fresno, CA: 18,962 SF office building constructed in 1997 on 3 acres lot. 100% leased by State of CA. NOI $264K/yr. $3.3M. 8% cap.
  4. Logan’ Roadhouse in Fairview Heights, IL: 8500 SF franchised restaurant (w/ 196 restaurants in 24 states) built in 2007 on 1.9 acres parcel next to 1.1 MM SF Saint Clair Square Mall in Saint Louis suburb. 15 yrs NNN ground lease (investor owns the land but if the tenant does not renew the lease than the building is reverted to the landowner). NOI $100K/yr with 10% rent bump every 5 yrs. Price reduced to $1.25M. 8% cap.
  5. Buffalo Wild Wing, in Keller, TX: 5000 SF restaurant on 1.34 acres lot in a fast growing (47%) and high income (AHI $88K/yr) Dallas suburb. 100% NNN lease with over 10 yrs remaining from a public corp. NOI $186K/yr. $2.067M. 9% cap. Note: Buffalo Wild Wing is among Fortune Magazine’s 100 Fastest growing companies in the world (listed in the US stock markets) in 2009. It ranks #82 with Apple at #39 and Google at #68. Please click here for the full list.
  6. Retail Plaza in Rockford, IL: 75,302 SF 6-unit shopping center built in 1989 on over 5 acres lot with excellent visibility. 83% NNN leased by 5 good tenants: Big Lots (NYSE: BIG), Family Dollar (NYSE: FDO), Aaron Furniture (NYSE: RNT), State of IL, and AZ Entertainment with very low rent. NOI $434K/yr. (w/ 1 yr rent guaranty for 17% vacant space) $3.95M. 11% cap.
  7. Jack In The Box in Mesa, AZ: 2370 SF restaurant on .6 ac lot in Phoenix metro. 100% absolute NNN corp lease till 2022. NOI $111K/yr with CPI-based rent increase every 5 yrs. $1.525M. 7.3% cap.
  8. Childcare Center in Richardson, TX: 6264 SF childcare center on 1.2 acres lot in a high income (AHI $86K/yr) Dallas suburb. 100% NNN leased by KinderCare, a national childcare provider with 9 yrs left. NOI $89K/yr with CPI-based rent increase. $1.11M. ap.
  9. Strip Mall in Orland Park, IL: 12,000 SF strip mall next to upscale Orland Square Mall in Chicago’s middle-class South suburb. 100% leased. NOI $139K/yr. Price just reduced to $1.58M. 9% cap.
  10. Office Building in San Jose, CA: 2269 SF free-stand office building near I-880. Price reduced to $879K.

    © Copyright Transmercial 2009. All rights reserved.

Thursday, September 3, 2009

Top 9 Properties Among 340+ 08/27/09

  1. Shopping Center in Lexington, KY: 37,234 SF shopping center anchored by Panera Bread on 3 acres of land at a signalized intersection on a main retail corridor. 93% leased to well-known tenants. NOI $573K/yr. $6.2M. 9.25% Cap.
  2. Shopping Center in Anaheim, CA: 20,030 SF well-located shopping center on 1.4 acres of land at active thoroughfare with excellent exposure. NOI $272K/yr. $2.5M. Once received a 4+M offer. 10.92% Proforma Cap. Distressed sale.
  3. Day Care Facility in Granada Hills, CA: 8209 SF single-tenant day care facility on 1.39 acres of parcel at prime location surrounded by new upscale million-dollar homes in a wealthy town with AHI over $123K/yr. just minutes from I-405/118. 100% NNN leased till 2016 by KinderCare, a national childcare provider. NOI $128K/yr. $1.663M. 7.75% Cap.
  4. Rite Aid in New London, CT: 11,160 appealing Rite Aid Pharmacy built in 2003 on 1.97 acres of parcel near Lawrence & Memorial Hospital. New 20-years NNN lease. NOI $198K/yr. $2.210M. 9% Cap.
  5. Instant Lube in Sparks, NV: brand new 2933 SF Instant Lube retail building adjacent to Wal-Mart, Costco and Home Depot. Brand new 20-years NNN leased with 3% annual rent increases. NOI $72K/yr. $900K. 8% Cap.
  6. Shopping Center in Kissimmee, FL: 13,760 SF shopping center on 1.47 acres of land with huge monument-sign for extra tenant-exposure along Hwy-441 (traffic count 59,500 daily). 93% leased. NOI $152K/yr. $1.640M. 9.3% Cap.
  7. Neighborhood Center in Rialto, CA: 23,854 SF attractive shopping center constructed in 1992 on 4.51 acres of parcel at hard corner location. 87% leased. NOI $275K/yr. $4M. 7% Cap. Upside potential when fully leased.
  8. Shopping Center in North Highlands, CA: 21,145 SF nice-looking shopping center on 1.91 acres of land with good tenant mix: Dentist, Pizza, Laundry, and Donuts at corner lot near I-80. NOI $323K/yr. $3.950M. 8.20% Cap. Upside potential as tenants are paying below market rent.
  9. Shopping Center in Macon, GA: 53,300 SF well-located neighborhood shopping center at dominant retail corridor in fast growing area. 96% leased. NOI $370K/yr. $3.7M. 10% Cap.

    © Copyright Transmercial 2009. All rights reserved.

Wednesday, September 2, 2009

Top 8 Retail Properties of 08-26-09

  1. Retail center in Irving, TX: 14,415 SF retail center built in 2006 on over 3 acres of land in a high growth (29% since 2000) high income (AHI $105K/yr) Dallas suburb. 100% NNN leased by 5 tenant with 3 tenant signing 10/15 yrs leases. Popular lunch destination. NOI $317K/yr. $3.2M. 9.9% cap
  2. Starbucks center in Roseville, CA: 4855 SF strip center in an explosive growth (120%) and high income (AHI $84K/yr) Sacramento suburb with easy access to hwy 65. 100% NNN leased by Starbucks, Deli and an Indian restaurant. NOI $160K/yr. $1.994M. 8% cap.
  3. Strip center in Moreno Valley, CA: 6240 SF new strip mall as part of a shopping center anchored by Fresh & Easy Grocery, Walgreens, and Autozone. 100% NNN leased by 3 tenants. NOI $167K/yr. $2.23M. 7.5% cap.
  4. Joe’s Crab Shacks in Duluth, GA: 9160 SF franchised restaurant built in 1994 on 2 acres parcel near I-85 exit in a high income Atlanta metro. 100% absolute NNN lease with over 10 yrs remaining. Corp guaranty from a corp with over 120 stores. NOI $158K/yr. $1.89M. 8.35% cap.
  5. Buffalo Wild Wing, in Keller, TX: 5000 SF restaurant on 1.34 acres lot in a fast growing (47%) and high income (AHI $88K/yr) Dallas suburb. 100% NNN lease with over 10 yrs remaining from a public corp. NOI $186K/yr. $2.067M. 9% cap.
  6. Shopping Plaza in Phoenix, AZ: 19,818 SF inline retail center built in 1998 on 2.21 acres lot. Shadow anchored by Albertsons supermarket. 89% NNN leased. Actual NOI $334K/yr. $3.35M. 10% actual cap. Upside potential when 100% leased.
  7. Office Depot in Aurora, CO: 20,927 SF 3-yrs old single-tenant retail building as part of a 1.7 million SF life-style center anchored by Wal-Mart, Sam' s Club, JC Penney, Best Buy, Bed, Bath & Beyond, Sports Authority, TJ Maxx, Ross Dress for Less, PETCO, Barnes & Noble, Ulta, Cost Plus World Market and Kerasotes Stadium 16 Theater. Fast growing and wealthy Denver suburb (AHI $105K/yr). NOI $292K/yr with low $14/SF rent. 12% rent bump in 2012. $3.66M. 8% cap.
  8. Retail Strip in Phoenix, AZ: 7534 SF retail center built in 2005 on 1 ac lot immediately adjacent to Walgreens and Autozone. 100% NNN leased by 6 tenants. NOI $161K/yr. $1.888M. 8.55% cap.

    © Copyright Transmercial 2009. All rights reserved.

Tuesday, September 1, 2009

Top 10 Properties Among 300 08-25-09

  1. Shopping Center in Temecula, CA: 13,630 SF multi-tenant strip center built in 2000 on 1.12 acres of land across from The Promenade Mall in Temecula. 100% NNN leased. NOI $356K/yr. $4.325M. 8.25% Cap.
  2. Strip Center in Temecula, CA: 6,750 SF strip center constructed in 2000 on .93 acre lot across 1.14 million SF regional mall near Fwy-15. 100% NNN leased by national tenants. NOI $265K/yr. $3.215M. 8.25% Cap.
  3. Strip Center in Sparks, NV: 4700 SF two-years old strip center adjacent to Wal-Mart, Home Depot and Costco in fast growing (93.48%) area. 100% NNN leased by Starbucks, Bobby Page Dry Cleaners and FedEx. NOI $193K/yr. $2.586M. 7.5% Cap.
  4. Multifamily Condos in Fort Myers, FL: gorgeous 65-condo units built in 1991 in affluent (AHI $98K/yr.) and growing (54.46%) community. NOI $481K/yr. $4.615M. 10.43% Cap.
  5. Strip Mall in Stockbridge, GA: 7800 SF attractive strip mall built in 1999 on 2.35 acres of land across from Walgreen’s in growing Atlanta metro. NOI $96K/yr. $1.125M. 8.56% Proforma Cap.
  6. Shopping Center in Palmdale, CA: 15,000 SF shopping center built in 1997 on 1.75 acres of parcel adjacent to Antelope Valley Mall fully NNN leased by strong national tenants: AT&T Wireless, Men’s Wearhouse, Cold Stone Creamery, Powder & Sun and Silver Depot. NOI $400K/yr. $5M. 8% Cap.
  7. Retail Center in Palmdale, CA: 15,250 SF eye-catching retail center built in 1998 on 1.38 acres of land across from Target at high traffic location near Fwy-14. 90% NNN leased by distinguished tenants. NOI $487K/yr. $6.1M. 8% Cap.
  8. Dollar Tree Retail Building in Twentynine Palms, CA: one-year old 15,506 SF free-standing retail building on 1.53 acres of land adjacent to State Bros. Brand new 10 years NNN corp lease. NOI $189K/yr. $2.235M. 8.5% Cap.
  9. Office Suites in Reno, NV: class-B 32,000 SF recently constructed office suites on 2.52 acres of parcel conveniently located near I-395. 75% leased. $4.9M. 9.5% Cap.
  10. Michaels Retail Building in Mountain View, CA: rare 21,579 SF retail building recently renovated on 1.41 acres of parcel across from Best Buy/Bed Bath and Beyond anchored shopping center just off of Fwy-101. 100% NNN leased till 2018. NOI $513K/yr. $6.950M. 7.38% Cap. Buyer to assume $5.310M @6.5% interest rate.

    © Copyright Transmercial 2009. All rights reserved.