CVS

Net Lease Advisor Overview

While baby boomer and senior citizen markets are growing in numbers, CVS continues to experience growth in retail pharmacy operations. They are able to consistently offer real estate opportunities for net leasing investors, with statistical sales reaching $840 per sq. ft. per year. When compared with market sector averages around $680 for competitors, they are considered to be lower risk, with marketable value, and backed by a solid company guarantee.

In fact, CVS currently achieves a higher credit rating than its competitor Walgreens, which was not always the case historically. Factoring in that there are certain CVS locations with more robust sales figures that can demand more rent increases, CVS retail pharmacies tend to be attractive in terms of net lease agreements. Typically these are structured with flat rent fees, since the real estate itself can affect returns. Each lot will generally be situated on one to two acres.

CVS

The variations in CVS leasing over the past ten years have seen both NN and NNN leasing structures. In earlier years, lease agreements were normally based on NN fee simple. Such leases may now see rent escalations every five years. NN leasing also makes the landlords accountable for structure and maintenance costs, which sometimes extends to include property maintenance and upkeep.

In more recent years, NNN leasing is being used and for initial terms, standard flat rental rates are offered. There are sometimes exceptions made with certain high traffic locations.

Pros

  • Easy access, highly visible locations
  • Tenants are investor-grade
  • CTL finance qualified company leasing
  • Standard property size of one acre or more

Cons

  • Initial term is typically flat rent
  • NN leasing is common
  • NN leasing is common

Tenant Description

Originally founded in Lowell, MA, CVS has been in the public eye for over fifty years. CVS Health Corporation is the official NYSE traded company, which encompasses many of the familiar CVS names.

The most well-known of them being the CVS Pharmacy retail name, counting roughly 9600 locations in the United States. From CVS Caremark, a benefit management provider pushing seventy five million member plans, to CVS MinuteClinic, with over 1100 bricks and mortar health clinics, they seem to be continuously expanding their pharmacy operations. Not to mention CVS Specialty, which services over 1 million senior-aged patients annually. Trailing only to Walgreen’s, the CVS retail pharmacy remains the 2nd biggest chain of its kind.