All Forum Posts by: Account Closed

@Joel Owens Definitely no free lunches! These would be all cash purchases, just wondering why some of them are so cheap relative to the rest. I have only a list of the properties, waiting on the details from the broker, I'll send the list over to you.

@Sam Shueh Amazon is encroaching on Walgreens/CVS territory, the just recently bought the PillPack pharmacy. To what extent this will effect the big two, I'm not sure yet.

A broker recently sent me a list of sevral CVS and Walgreens properties for sale throughout the U.S. I'm currently eyeing several of the CVS properties, but they just seem too good to be true. All the Walgreens are listed for over $5M (that makes sense), a few of the CVS are listed at ~$3.4, but many of them are around $1M, some even less and that seems suspicious.

All are absolute NNN corporate leases with 15+ years on the lease with fairly large lots and CAPs above 5%. A few of them are in areas that aren't that great but the rest seem to be in decent locations.

What's the deal here? Most of the the Walgreens and CVS I've seen are going for at least $3M, trying to figure out why these are going for so much less. Anyone have any idea?

So what's the difference between a corporate-guaranteed franchisee tenant and a corporate tenant? From reading a lease recently, the corporation is liable for any defaults in a corporate-guaranteed franchisee tenant. If that's the case, why are corporate tenants deemed more secure than franchisees? 

@Jeff Kehl This is great advice, thank you! I am looking or single-tenant properties, specifically NNN. We've been eying restaurants, especially QSR's but what we've been finding is that these are commanding a premium (especially if they're corporate tenants, not franchisees) and come with fairly low CAP rates and the ability to negotiate the prices is almost non-existent. But as Brant said above, they are lower risk and safer than mom and pop shops.

Strip center's are also a great alternative and as you said, the diversity creates less risk and more opportunity. 

@Brant Garner Some great stuff here, thanks!

All too familiar with the kick-out clauses. Been eyeing a few Starbucks properties and they seem to like the kick-out clause and they require you to obtain full liability insurance on the property. Some don't have kick-out clauses but its rare, and I'm not too keen on the liability insurance. It would be a small amount to pay annually but I feel that a lawsuit from a slip-and-fall or something similar wouldn't be very enjoyable to get roped into.

@Brant Garner @Jeff Kehl I can definitely see the higher returns relative to properties here in the West coast. But for those of us on the other side of the country, how do you go about analyzing a property and the area it's in? What's the best way to make sure that the McDonald's I'm buying in Tennessee is a great property to invest in?

Do you invest exclusively in your home state or nationwide? What do you look for in a commercial property? National credit tenants or independent tenants? How do you go about learning about a company/business when opting for a national credit tenant? How do you assess the area if you're investing out of state? How do you assess the risk?

As others have eluded to, residential has lower barriers to entry, especially in today's market. The barriers aren't just financial, however. If you're going to invest a large amount of money into a commercial investment, you better know the market and industry very, very well. You can't just buy a Starbucks, for example, and not know a thing about the coffee industry (or food service in general). It's more than just buying a nice looking property in a nice area, many factors at play.

Not only that, the risks to commercial are usually greater. If you get a vacancy in a residential, it's usually easier to fill (everyone needs a place to  live). If you lose a commercial tenant, it can be difficult to replace them. If you have a nationally recognized tenant, the risk of default is usually low, but you never know what might happen in today's world. 

@Joel Owens @Jay Hinrichs

I think you guys speak to both camps with regards to gas vs. electric. I can see how there would be great demand for electric, but cost definitely remains a huge limiting factor, as does options, variety, and tech advancement.

I guess a lot of this comes down to timing - would a recession coupled with high oil prices cause a sudden increase in demand for electric which would then facilitate a faster advancement of electric auto technology and adoption? I suppose that's a purely hypothetical scenario which would require a perfect storm of factors.

@Charlie MacPherson California and especially LA have the most stringent soil contamination laws and many gas stations have been retrofitted with double-wall tanks. But the most lucrative stations offer an amalgam of services which could be adapted to service electric cars.

@Mike Nelson All great questions.

We don't yet know if they'll exercise any lease extensions. I suppose as time gets closer to lease expiration, we'll get a clearer idea of whether or not they'll extend, but brokers haven't told us why they haven't this far out (many are expiring within the next 5 years).

Gas stations here in California are doing very well. My dad is a CPA by trade and almost all his clients who own/operate gas stations have been doing very well for the past few years. From what I understand, however, low oil prices have been very hard on the big companies.

Depending on location, many food marts out-sell the gas part of the property. I know of a few stations that lose money on the sale of the gas, but make it up with very high monthly food mart sales. Service bays and car washes only add to this.