WALGREENS OFFERING MEMORANDUM ACTUAL PROPERTY Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of 2016 Marcus & Millichap. Activity ID: Y0331915 1
Investment Overview Marcus & Millichap is pleased to present this rare Walgreens with rent increases over the base term in Aliso Viejo, California; which is eight miles east of Laguna Beach. Walgreens signed a 20-year absolute-net lease in 2008 with 5 percent rent increases every 10 years. There are currently 11 years remaining and zero landlord responsibilities. The lease is backed by a corporate guaranty from Walgreen Co, which was ranked number 17 on the Fortune 500 list as of June 2017. The company registered $117.3 billion across more than 8,200 locations in 2016. The subject property is situated at the signalized, hard corner intersection of Aliso Creek Road and Enterprise. The intersection sees more than 49,000 vehicles per day. This Walgreens Pharmacy benefits from being less than 500 feet from Hoag Health Urgent Care and Medical Office Building. Additionally, this asset is situated within the 227,000-square foot Aliso Viejo Commons shopping center, which features national tenants such as Lowes Home Improvement and Trader Joe s. Directly adjacent to the subject property is the Aliso Viejo Town Center. This 486,000-square foot power center is anchored by the Edwards Aliso Viejo Stadium Movie Theatre, which has 20 screens and one IMAX theatre. Additional anchors feature: TJ Maxx and HomeGoods, PetSmart, and Ralphs Fresh Fare. The asset also benefits from strong demographics. There are more than 284,000 people with an average household income greater than $121,000 within five miles. Aliso Niguel High School is less than two miles from the subject property. This 3,000-student high school was ranked among the top 5 percent of high schools in the United States by Newsweek in 2016. Walgreens With Rare 5 Percent Increases Every 10 Years in Aliso Viejo, California Less Than Eight Miles East of Laguna Beach Absolute-Net Lease With More Than 11 Years Remaining Zero Landlord Responsibilities Corporate Guaranty NASDAQ: WBA Number 17 on Fortune 500 (June 2017) Standard & Poor (S&P): BBB Signalized, Hard Corner Intersection of Enterprise and Aliso Creek Road More Than 46,000 Vehicles Per Day (VPD) Pad Site to Commons at Aliso Viejo Shopping Center 227,000 Square Feet of Retail Anchored by Strong National Credit Lowes Home Improvement, Trade Joe s, and Michael s Directly Adjacent to Hoag Health Center 36,000-Square Foot Medical Office and Urgent Care Building Directly Adjacent to the Aliso Viejo Town Center 486,000-Square Foot Power Center Anchored by Edwards Aliso Viejo Stadium Movie Theatre 20 Screens and IMAX, TJ Maxx and HomeGoods, PetSmart, and Ralphs Fresh Fare Less Than Half Mile Vantis Apartments Brand New Construction 435-Unit Luxury Apartment Complex Featuring Two Pools, Two Spas, Fitness Center, and More Less Than Two Miles from Aliso Niguel High School Top 5 Percent of High Schools Nationwide in 2016 by Newsweek s More Than 3,000 Students Enrolled Outstanding Demographics within Five-Mile Radius More Than 284,000 People With an Average Household Income Greater Than $121,000 Additional Tenants in the Immediate Vicinity Include: Target, Home Depot, Hobby Lobby, Vons, Sprouts, Costco, Kohl s, Walmart, and many more. ACTUAL PROPERTY Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of 2016 Marcus & Millichap. Activity ID: Y0331915 2
Financial Overview OFFERING SUMMARY PRICE $15,500,000 CAP RATE 4.27% NOI $661,500* DEBT SERVICE $439,446 NET CASH FLOW AFTER DEBT SERVICE $222,054 CASH ON CASH RETURN 2.74% PRICE PER SQUARE FOOT $1,157.93 RENT PER SQUARE FOOT $49.42 YEAR BUILT 2003 APPROXIMATE LOT SIZE 2.02 Acres GROSS LEASEABLE AREA 13,386 TYPE OF OWNERSHIP Fee Simple LEASE GUARANTOR Corporate Guaranty LEASE TYPE Absolute-Net ROOF AND STRUCTURE Tenant Responsible LEASE SUMMARY LEASE COMMENCEMENT DATE 11/21/2008 LEASE EXPIRATION DATE 11/30/2028 LEASE TERM 20 Years TERM REMAINING 11+ Years INCREASES 5% Every 10 Years OPTIONS TO RENEW 5, 10-Year & 1, 5-Year OPTIONS TO TERMINATE None OPTIONS TO PURCHASE None FIRST RIGHT OF REFUSAL None *Based on 12/1/2018 Rent Bump Year NOI CASH FLOW SUMMARY Debt Service Cash Flow Cash on Cash Principal Balance 2018 $632,625 $439,446 $193,179 2.38% $7,400,000 2019 $661,500 $439,446 $222,054 2.74% $7,276,336 2020 $661,500 $439,446 $222,054 2.74% $7,147,248 2021 $661,500 $439,446 $222,054 2.74% $7,012,499 2022 $661,500 $439,446 $222,054 2.74% $6,871,840 2023 (Maturity Year) $661,500 $439,446 $222,054 2.74% $6,725,012 ASSUMABLE LOAN BANK/SERVICER NAME Morgan Stanley Capital Holdings, Limited Liability Company LOAN BALANCE $7,400,000 LOAN COMMENCEMENT 5/1/2013 MATURITY DATE 4/1/2023 AMORTIZATION I/O 5 Years, 30-Year Amortization 5 Years TERM 10 Years INTEREST RATE 4.30% PREPAYMENT Defeasance DOWN PAYMENT/EQUITY REQUIRED (52%) $8,100,000 Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of 2016 Marcus & Millichap. Activity ID: Y0331915 3
Tenant Overview - Walgreens Founded in 1901, Walgreens Boots Alliance, Incorporated is the nation s largest drugstore chain. Charles R. Walgreen built the chain from a single drugstore where he created his own drug products. By 1919 there were 20 stores, and in 1927 the Company went public. Three years later, the store count was well over 500. Today, Walgreen operates over 8,200 stores in all 50 states, DC, Puerto Rico and the United States Virgin Islands. More than 400 of its stores offer medical services through its Healthcare Clinics. Additionally, the Company operates digital businesses that include: Walgreens.com, drugstore.com, Beauty.com, SkinStore.com and VisionDirect.com. In December 2014, Walgreen acquired the remaining 55 Percent of European retailer and wholesaler Alliance Boots, and reorganized under a holding company called Walgreens Boots Alliance, Incorporated; headquartered in Chicago. The Walgreen chain now constitutes the Retail Pharmacy United States of America Division of Walgreens Boots Alliance, Incorporated. In October 2015, Walgreens Boots Alliance announced an agreement to acquire all outstanding shares of Rite Aid for $9.00 per share in cash, for a total enterprise value of about $17.20 billion, including acquired net debt. After failure to obtain Federal Trade Commission approval, Walgreens announced in June 2017 to formally end the merger agreement, and will instead pay $5-Billion to purchase 2,186 Rite Aids, which has been approved as of the second quarter of 2017. After the new transaction closes, the company will convert most of those Rite Aids to the Walgreens brand. Walgreens expects the new transaction to be modestly accretive to adjusted diluted net earnings per share in the first full year after the initial closing and expects to realize more than $400 million in cost savings within three to four years, primarily from procurement, cost savings and other operational issues. TENANT PROFILE TENANT TRADE NAME Walgreens Boots Alliance, Incorporated OWNERSHIP Public TENANT Corporate Store LEASE GUARANTOR Corporate Guarantee NUMBER OF LOCATIONS 8,175+ HEADQUARTERED Deerfield, Illinois SALES VOLUME $117.3-Billion (2016) NET WORTH $30.2-Billion (2016) STOCK SYMBOL WBA CREDIT RATING BBB RATING AGENCY Standard & Poor (S&P) RANK Number 17 on Fortune 500 (June 2017) Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of 2016 Marcus & Millichap. Activity ID: Y0331915 4
Ten an t Overview - Wa l g r eens 26 53 1 A l i s o C r e e k Road - ALIS O VIE J O, C ALIFORNIA 92656 Walgreens With Rare 5 Percent Increases Every 10 Years in Aliso Viejo, California Less Than 8 Miles East of Laguna Beach Absolute-Net Lease With More Than 11 Years Remaining Zero Landlord Responsibilities Signalized, Hard Corner Intersection of Enterprise and Aliso Creek Road More Than 46,000 Vehicles Per Day Outstanding Demographics More Than 284,000 People With an Average Household Income Greater Than $121,000 Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of 2016 Marcus & Millichap. Activity ID: Y0331915 5
Aerial Overview Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of 2016 Marcus & Millichap. Activity ID: Y0331915 6
Area Overview & Demographics 1-Mile 3-Mile 5-Mile Population 2000 Population 20,120 110,639 252,996 2010 Population 24,565 117,404 264,961 2017 Population 25,418 125,094 284,769 2022 Population 26,268 129,945 296,249 1-Mile 3-Mile 5-Mile Households 2000 Households 8,568 47,148 98,487 2010 Households 10,031 48,458 101,832 2017 Households 10,404 50,915 107,775 2022 Households 10,760 52,781 111,863 1-Mile 3-Mile 5-Mile Household (HH) Incomes 2017 Average HH $117,225 $115,349 $121,835 Income 2017 Median HH Income $94,677 $88,710 $93,922 2017 Per Capita Income $47,982 $46,949 $46,110 Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of 2016 Marcus & Millichap. Activity ID: Y0331915 7
Market Overview - Aliso Viejo, California Located in the heart of Southern California, Aliso Viejo is a city in the San Joaquin Hills of southern Orange County, California. It had a population of 47,823 as of the 2010 census, up from 40,166 as of the 2000 census. It became Orange County s 34th city on July 1, 2001, the only city in Orange County to be incorporated since 2000. It is bordered by the cities of Laguna Beach on the west and southwest, Laguna Hills on the east, Laguna Niguel on the southeast, and Laguna Woods on the north. With award-winning schools, attractive neighborhoods, and fabulous shopping, dining and entertainment, Aliso Viejo is certainly a popular place to live. The City, which is continually ranked one of the safest cities in the nation, boasts rolling hillside, valley terrain and picturesque views of mountains, streams, parks and city lights. Aliso Viejo is the model live-work-play community. The city features neighborhoods that mix homes, workplaces, stores and services. A transit-friendly, energyconscious and land-conserving community, Aliso Viejo also fosters a sense of community by creating a friendlier streetscape, quality infrastructure like parks, schools and new roads, shopping close to home, community services and neighbors that genuinely feel connected to the community and to one another in some fashion. The City is home to the headquarters of several large corporations and the community features ample employment opportunities and extensive recreational facilities. The City also enjoys access to the Orange County trail system. An abundance of parks and trails, cultural and recreational activities and youth sports programs further enhance the quality of life for a community with a vision to ensure long-term viability. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of 2016 Marcus & Millichap. Activity ID: Y0331915 8
Marcus & Millichap hereby advises all prospective purchasers of Net Leased property as follows: The information contained in this Marketing Brochure has been obtained from sources we believe to be reliable. However, Marcus & Millichap has not and will not verify any of this information, nor has Marcus & Millichap conducted any investigation regarding these matters. Marcus & Millichap makes no guarantee, warranty or representation whatsoever about the accuracy or completeness of any information provided. As the Buyer of a net leased property, it is the Buyer s responsibility to independently confirm the accuracy and completeness of all material information before completing any purchase. This Marketing Brochure is not a substitute for your thorough due diligence investigation of this investment opportunity. Marcus & Millichap expressly denies any obligation to conduct a due diligence examination of this Property for Buyer. Any projections, opinions, assumptions or estimates used in this Marketing Brochure are for example only and do not represent the current or future performance of this property. The value of a net leased property to you depends on factors that should be evaluated by you and your tax, financial and legal advisors. Buyer and Buyer s tax, financial, legal, and construction advisors should conduct a careful, independent investigation of any net leased property to determine to your satisfaction with the suitability of the property for your needs. Like all real estate investments, this investment carries significant risks. Buyer and Buyer s legal and financial advisors must request and carefully review all legal and financial documents related to the property and tenant. While the tenant s past performance at this or other locations is an important consideration, it is not a guarantee of future success. Similarly, the lease rate for some properties, including newly-constructed facilities or newly-acquired locations, may be set based on a tenant s projected sales with little or no record of actual performance, or comparable rents for the area. Returns are not guaranteed; the tenant and any guarantors may fail to pay the lease rent or property taxes, or may fail to comply with other material terms of the lease; cash flow may be interrupted in part or in whole due to market, economic, environmental or other conditions. Regardless of tenant history and lease guarantees, Buyer is responsible for conducting his/her own investigation of all matters affecting the intrinsic value of the property and the value of any long-term lease, including the likelihood of locating a replacement tenant if the current tenant should default or abandon the property, and the lease terms that Buyer may be able to negotiate with a potential replacement tenant considering the location of the property, and Buyer s legal ability to make alternate use of the property. By accepting this Marketing Brochure you agree to release Marcus & Millichap Real Estate Investment Services and hold it harmless from any kind of claim, cost, expense, or liability arising out of your investigation and/or purchase of this net leased property.
Walgreens Broker of Record Kent Williams Tel: (858) 373-3100 License: 00823860