offering memorandum Walgreens 3101 E. 10th Street Greenville, North Carolina 27858
CONFIDENTIAL INFORMATION INFORMATION NOT WARRANTED This Offering Memorandum and any subsequent evaluation material you may be provided (collectively known as the Offering Memorandum ) is intended solely for your limited use in considering whether to pursue negotiations to acquire Walgreens (the Property ) located in Greenville, North Carolina. The Property is being marketed for sale by Ackerman & Co. ( Broker ). The Offering Memorandum contains brief, selected information pertaining to the business and affairs of the Property and has been prepared by Broker. It does not, however, purport to be all-inclusive or to contain all of the information that a prospective purchaser may desire. Broker makes no representation or warranty, express or implied, as to the accuracy or completeness of the Offering Memorandum or any of its contents, and no legal liability is assumed to be implied with respect thereto. By acknowledgment of your receipt of the Offering Memorandum you agree that the Offering Memorandum and its contents are confidential, that you will hold and treat it in the strictest of confidence, that you will not directly or indirectly disclose, or permit anyone else to disclose, the Offering Memorandum or its contents to any other person, firm, or entity (including, without limitation, any principal for whom you have been engaged), without prior written authorization of Owner or Broker and that you will not use or permit to be used the Offering Memorandum or its contents to be copied or used in any fashion or manner detrimental to the interest of Owner. Photocopy or other duplication is strictly prohibited. THE OFFERING MEMORANDUM SHALL NOT BE DEEMED TO REPRESENT THAT STATE OF AFFAIRS OF THE PROPERTY OR CONSTITUTE AN INDICATION THAT THERE HAS BEEN NO CHANGE IN THE BUSINESS OR AFFAIRS OF THE PROPERTY SINCE THE DATE OF PREPARATION OF THE OFFERING MEMORANDUM. The information provided in the Offering Memorandum has been gathered from sources that are deemed reliable, but the Broker does not warrant or represent that the information is true or correct. Prospective offerors are advised to verify information independently. The Offering Memorandum is not to be construed as an offer or as any part of a contract to sell the property. Furthermore, the inclusion or exclusion in the Offering Memorandum of information relating to asbestos or any other hazardous, toxic or dangerous chemical item, waste or substance (hereinafter collectively referred to as Waste ) relating to the Property shall in no way be construed as creating any warranties or representations, expressed or implied by the Broker as to the existence or nonexistence or nature of Waste in, under or on the Property, it may create significant legal and/or economic obligations upon the Owner, lessee and/or other holders of interest in the Property or a part thereof and you are hereby advised to obtain professional assistance such as from a consultant, engineer and/or attorney prior to taking an interest in the Property or a part thereof.
Walgreens Table Of Contents 01 executive SUMMARY Investment Summary Location and Demographics Property Photographs and Aerials Property Overview 02 TENANT Overview Tenant Overview Site Plan 03 market Overview Greenville, N.C. Market Overview Competitive Property Map Detailed Demographics 04 financial Overview Financial Summary Cash Flow Projections Summary of Prospective Cash Flows Contacts JASON POWELL, CCIM Vice President, Investment Sales ANDREW MURPHY Senior Vice President, Investment Sales SPENCER COAN Financial Analyst BILL MITCHELL Director Ackerman & Co. 770.913.3952 jpowell@ackermanco.net Ackerman & Co. 770.913.3950 amurphy@ackermanco.net Ackerman & Co. 678.993.2927 scoan@ackermanco.net icap Realty Advisors 404.946.6919 wmitchell@icaprealty.com
01 EXECUTIVE SUMMARY Investment Summary Location and Demographics Property Photographs and Aerials Property Overview Walgreens
01 Executive Summary net leased walgreens 5 INVESTMENT SUMMARY Ackerman & Co. s Investment Sales team is pleased to exclusively present for sale an absolute net-leased Walgreens located in Greenville, North Carolina. The Walgreens property was built in 2005 and has over 18 years remaining on its initial lease term. The building totals 14,560 SF and provides investors with long term stable cash flow. In addition to the remaining 18+ year term, Walgreens has 10 five-year renewal options. This institutional quality asset is located in an affluent location in Greenville. The asset is fee simple, and is being offered with attractive, assumable, non-recourse debt. Investment Highlights: Stable Cash Flow: The asset will provide a long-term, steady cash flow to ownership. Due to the favorable assumable debt structure (Interest Only); the leveraged cash-on-cash return is much higher than it would be with market debt. In addition, an investor enjoys the advantage of the lease having five-year renewal terms, as opposed to the one-year renewal structure found in many other Walgreens leases. Excellent Physical Quality: Recently constructed, this property will require little, if any capital improvements over the term, and due to the absolute NNN reimbursement structure, the cost of any capital improvements are borne by Walgreens. Superior Credit Tenant: Walgreens came into existence in 1901 and presently has 8,046 drugstores in the United States and Puerto Rico. In 2010, Walgreens reported $67,400,000,000 in gross sales, which is 6.4% higher than calendar year 2009. Currently, Walgreens has a total of 244,000 employees and Standard & Poor s has rated Walgreens A. Mature Retail Submarket/Quality Demographics: The subject Walgreens is located on the corner of E. 10th Street and Greenville Boulevard in Greeneville, NC. This area is a very mature location with 31,000 VPD and such retailers as McDonalds, Dunkin Donuts, Burger King, Food Lion, Quiznos, and Jackson Hewitt. In addition, the population within a three-mile radius is roughly 50,000 people and has an expected growth rate over the next five years of 2.50%. In addition, the 2010 estimated household income is roughly $55,000. INVESTMENT SUMMARY Square Footage: Acreage: 14,560 SF 1.25 acres Occupancy: 100% Offering Price: $5,741,935 Debt Structure: In-place NOI: $385,000 Leveraged Cash-on-Cash 7.75% Assumable, non-recourse
01 Executive Summary net leased walgreens 6 LOCATION AND DEMOGRAPHICS The subject Walgreens, located in Greenville, NC, was built in 2005 and is in excellent physical condition. The drug store fronts E. 10th Street and Greenville Boulevard and has two points of ingress / egress on the site. The site offers ample parking and good visibility off Third Street. In 2010, total population estimate within 5 miles was 89,294 and average household income within the 5 miles was estimated to be $54,723. Chapel Hill 87 Henderson Raleigh 85 40 95 Greenville 70 17 Plymouth 64 DEMOGRAPHIC SUMMARY Elizabethtown Walgreens 3101 E. 10th Street Greenville, North Carolina 27858 1 MILE 3 MILES 5 MILES Population Estimate 2010 8,839 48,062 89,294 Total Households 4,191 19,506 36,811 Average Household Income $38,489 $53,985 $54,723 Traffic counts 31,000 vehicles per day on greenville Boulevard 28,000 vehicles per day on East 10th Street Source: 2010 MPSI Systems Inc. d.b.a. DataMetrix
01 Executive Summary net leased walgreens 7 PROPERTY PHOTOS 3101 E. 10th Street Greenville, North Carolina 27858
01 Executive Summary net leased walgreens 8 PROPERTY AERIAL 31,000 vehicles per day. East 10th Street Greenville Boulevard 28,000 vehicles per day.
01 Executive Summary net leased walgreens 9 PROPERTY OVERVIEW Address: County: Municipality: Building Size: Land Area 3101 E. 10th Street Greenville, North Carolina 27858 Pitt City of Greenville 14,560 SF / One-story Building 1.25 acres Parcel ID: 68148 Year Built: 2005 Construction: Zoning: Parking: Masonry, Steel CG Approximately 58 spaces Signage: Street Frontage: Access: Store Number: 2453 Pylon sign at the intersection of 10th Street and Greenville Blvd. and two building-mounted signs (one on each side) 251 feet along 10th Street and 232 feet along Greenville Boulevard There are points of ingress/egress via 10th Street and Greenville Boulevard Drive-through Pharmacy Health Center Store Hours of Operation: Yes No Monday - Sunday, 8 AM - 10 PM
01 Executive Summary net leased walgreens 10 AREA MAP Pactolus Hwy Pitt-Greenville Airport 11 W 5th St 13 Stantonsburg Rd 903 W 5th St E 1st St E 10th St 264 33 Walgreens 3101 E. 10th Street Greenville, North Carolina 27858 W Arlington Blvd 13 East Carolina University S Evans St Greenville Blvd 264 E 10th St Dickinson Ave Greenville Blvd SW S Memorial Dr 903 11 264 43 S Charles Blvd 43 Pottertown Road 33 E Fire Tower Rd ower Rd
02 TENANT Overview Tenant Overview Site Plan Walgreens
02 Tenant Overview net leased walgreens 12 TENANT SUMMARY SIZE One-Story Building SQUARE FOOTAGE 14,560 LEASE EXPIRATION 2030 Walgreens Founded in 1901, Walgreens currently operates over 8,000 drugstore chains across the United States and Puerto Rico. Walgreens is a national leader in providing prescription and non-prescription drugs and household consumer products. With an S&P credit rating of A, Walgreens is consistently regarded as one of the most financially sound organizations in the United States. Innovations such as store layout remodeling and in-store health centers have allowed Walgreens to consistently outperform its competitors with regard to earnings per share, revenue growth, net income growth, and cash flow from operations. In 2010, Walgreens posted its unprecedented 36th straight year of record sales and earnings. In April of 2010, to increase their presence in New York City, the largest pharmacy market in the United States, Walgreens acquired longtime New York-Based pharmacy chain Duane Reade. The acquisition included 257 drug stores and two distribution centers. In June of 2011, Walgreens again showed their ability to innovate and expand their customer base by acquiring major online pharmacy provider Drugstore.com. Most analysts believe superior operations and customer service will allow Walgreens to continue their domination in the rapidly growing drugstore industry. Walgreen CO (NYSE: WAG) S&P Rating: A Headquarters: Deerfield, IL USA Store Locations: 8,046 Year Founded: 1901 Employees: 244,000 2010 Revenue: $67.42 B www.walgreens.com
02 Tenant Overview net leased walgreens 13 SITE PLAN GREENVILLE BOULEVARD One-story masonry/steel 14,560 SF 58 parking spaces
03 MARKET Overview Greenville, North Carolina Competitive Property Survey Detailed Demographics Walgreens
03 Market Overview net leased walgreens 15 GREENVILLE, NORTH CAROLINA In 2010 Greenville was listed as the 10th largest city in the state of North Carolina. Greenville has established itself as a regional hub for healthcare, education, and sports. The city has consistently ranked as a top city nationally by highly-regarded publications in several categories. Strong Recognition In 2008, Forbes magazine ranked Greenville, NC 8th nationally as a Best place for Business and Careers and, in 2010, the magazine ranked Greenville as 24th in the nation for mid-city business growth and development. Greenville was named by America s Promise Alliance as one of the nation s 100 Best Communities for Young People in 2008 and 2010. In 2004, Greenville was named as a Sportstown USA by Sports Illustrated and the National Parks and Recreation Association. POPULATION GROWTH (in thousands) 180 160 140 120 100 80 60 40 20 0 90,146 108,480 PITT COUNTY historical GROWTH 133,719 168,148 1980 1990 2000 2010 Steady Growth Pitt County has shown consistent growth with ten-year growth increases exceeding 20% since to 1980. Greenville s location allows easy access to the Carolina coast and nearby Research Triangle. The city s balance of both manufacturing and non-manufacturing employment brings a wide array of young people to the area. Since the 1980s, Pitt County has grown from 90,146 residents to more than 168,148 residents.
03 Market Overview net leased walgreens 16 GREENVILLE, NORTH CAROLINA, CONT D. major greenville area employers - manufacturing Employer Location Product Employment Established Union DSM (2 plants) Greenville Chemicals 1,100 1997 No NACCO Materials Handling Group Greenville Lift Trucks 1,100 1974 No Alliance One International Farmville Tobacco Processing 850 1907 Yes The Roberts Co., Inc. Winterville Metal Fabrication 500 1978 No ASMO Greenville of NC Greenville Small Electric Motors 410 1995 No major greenville area employers - non-manufacturing Employer Location Product Employment Established Union Pitt County Memorial Hospital Greenville Health care 7,868 1997 No Pitt County University Greenville Education 5,455 1907 No Pitt County Public Schools Greenville Education 3,111 1885 No County of Pitt Greenville Government Administration 968 1760 No Pitt Community College Greenville Education 861 1961 No City of Greenville Greenville Government Administration 743 1956 No Physicians East Greenville Medical Care 500 1965 No Greenville Utilities Commission Greenville Public Utilities 435 1905 No
03 Market Overview net leased walgreens 17 COMPETITIVE PROPERTY MAP (3 MILES) Pitt-Greenville Airport 11 us Hwy W 5th St 13 W 5th St E 1st St Rite Aid Pharmacy 3012 E. 10th St. 264 33 Stantonsburg Rd 903 E 10th St CVS Pharmacy 3116 E. 10th St. 13 East Carolina University Dickinson Ave Greenville Blvd SW W Arlington Blvd S Memorial Dr 903 11 Rite Aid Pharmacy 1401 Charles Blvd. S Evans St 264 43 Greenville Blvd S Charles Blvd 43 264 E 10th St Walgreens 3101 E. 10th Street Greenville, North Carolina 27858 Pottertown Road 33 Walgreens 103 Greenville Blvd. SE 3-MILE RADIUs E Fire Tower Rd Rite Aid Pharmacy 2098 E. Fire Tower Rd. Walgreens 2105 E. Fire Tower Rd. E Fire Tower Rd CVS Pharmacy 1895 E. Fire Tower Rd.
03 Market Overview net leased walgreens 18 DETAILED DEMOGRAPHICS DEMOGRAPHICS 1 MILE 3 MILES 5 MILES 2010 Estimated Population 8,839 48,062 89,294 2015 Projected Population 9,752 51,833 97,841 2000 Census Population 7,386 40,936 74,967 1990 Census Population 5,625 35,584 60,025 Growth 2000-2010 1.77% 1.58% 1.72% Growth 2010-2015 1.99% 1.52% 1.85% 2010 Estimated Median Age 24.8 26.2 29.0 Total Businesses 227 2,210 3,812 Total Employees 2,090 22,077 50,445 2010 Estimated Households 4,191 19,506 36,811 2015 Projected Households 4,638 21,344 40,857 2000 Census Households 3,482 16,462 29,952 1990 Census Households 2,630 13,678 22,701 Growth 2000-2010 1.82% 1.67% 2.03% Growth 2010-2015 2.05% 1.82% 2.11% 2010 Estimated Average Household Size 2.09 2.19 2.26 2010 Estimated Median Household Income $26,857 $40,063 $41,987 2015 Projected Median Household Income $30,557 $46,363 $49,021 2000 Census Median Household Income $20,573 $29,755 $31,774 1990 Census Median Household Income $20,801 $22,506 $23,766 2010 Estimated Average Household Income $38,489 $53,985 $54,723 2010 Estimated Per Capita Income $18,744 $22,927 $23,563 2010 Estimated Housing Units 4,720 23,225 43,098 2010 Estimated Occupied Units 88.80% 83.90% 85.40% 2010 Estimated Vacant Units 11.20% 16.00% 14.60% 2010 Estimated Owner Occupied Units 25.90% 39.10% 41.70% 2010 Estimated Renter Occupied Units 62.90% 44.80% 43.70% 2010 Estimated Median Housing Value $115,432 $124,729 $117,749
04 FINANCIAL Overview Financial Summary Cash Flow Projections Summary of Prospective Cash Flows Walgreens
04 Financial Overview net leased walgreens 20 FINANCIAL SUMMARY FINANCIAL OVERVIEW Sales Price $5,741,935 Square Feet 14,560 Price Per SF $394.36 Leverage Cash-on-Cash 7.75% Financing BUILDING INFORMATION Address Property Type Must Assume Existing Non-recourse Financing 3101 E. 10th Street Greenville, NC 27858 Single-tenant Retail Year Built 2005 Parcel Size Type of Ownership 1.3 Acres Fee Simple Current Occupancy 100% Lease details Commencement Date 2/1/2005 End Date 1/31/2030 Lease Term Term Remaining 25 Years Approximately 18 Years Annual Rent $385,000 Rent Per Square Foot $26.44 Lease Type Options existing financial terms Existing Financing NNN Ten (10) x Five (5) Year Must be Assumed Original Loan Amount $3,000,000 Current Loan Amount (As of 9/1/11) $3,000,000 Amortization Schedule Interest Only Interest Rate 5.75% Maturity Date 2/1/2035 Optional Prepayment Date 2/1/2020 Extended Rate (2020-2035) 7.75% Recourse Requirement Non-recourse
04 Financial Overview net leased walgreens 21 CASH FLOW PROJECTIONS Fiscal Year Ending - November 30 Potential Gross Revenue CY 2012 $/SF/ 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Base Rental Revenue $26.44 $385,000 $385,000 $385,000 $385,000 $385,000 $385,000 $385,000 $385,000 $385,000 $385,000 $385,000 $385,000 $385,000 Scheduled Base Rental $26.44 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 Total Potential Gross $26.44 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 Vacancy Loss 0.00 0 0 0 0 0 0 0 0 0 0 0 0 0 Effective gross revenue $26.44 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 Net operating Income $26.44 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 Operating Cash Flow $26.44 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 385,000 Financing Debt Service (172,500) (172,500) (172,500) (172,500) (172,500) (172,500) (172,500) (172,500) (172,500) (172,500) (172,500) (172,500) (172,500) Cash Flow After Debt $212,500 $212,500 $212,500 $212,500 $212,500 $212,500 $212,500 $212,500 $212,500 $212,500 $212,500 $212,500 $212,500 Leverage Summary Leveraged Cash-on-Cash Return Leveraged Cash-on-Cash Return (Cumm Average) 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% Debt Coverage Ratio 2.23 2.23 2.23 2.23 2.23 2.23 2.23 2.23 2.23 2.23 2.23 2.23 2.23 existing ASSUMABLE DEBT TERMS Loan Terms* Original Balance (02/01/05) $3,000,000 Principal Balance (09/01/11) $3,000,000 Assumption Fee 0.00% Balance at Maturity (02/01/35) $3,000,000 Fixed Interest Rate 5.75% Annual Debt Service Payment $172,500 Optional Prepayment Date 2/1/2020 Extended Int. Rate (2020-2035) 7.75% General Property Notes [1] No vacancy loss has been assumed for this analysis. [2] The weighted average downtime has been rounded to the nearest whole month. *The existing note is interest only and has an optional prepayment date on 02/01/2020. From 2020 through the note s maturity date, the purchaser can maintain the loan at a guaranteed interest rate of 7.75%. This analysis assumes that an extension of the current rate can be attained, and the terms will continue as they are today throughought the remainder of the analysis.
04 Financial Overview net leased walgreens 22 SUMMARY OF PROSPECTIVE CASH FLOWS LOAN RENEWAL SCENARIO THROUGH 2/2035 Initial Investment (Return on initial equity) $2,741,935 Initial Lease Term End of Year 1 $212,500 7.75% End of Year 2 $212,500 7.75% End of Year 3 $212,500 7.75% End of Year 4 $212,500 7.75% End of Year 5 $212,500 7.75% End of Year 6 $212,500 7.75% End of Year 7 $212,500 7.75% End of Year 8 $212,500 7.75% End of Year 9* $152,500 5.56% End of Year 10 $152,500 5.56% End of Year 11 $152,500 5.56% End of Year 12 $152,500 5.56% End of Year 13 $152,500 5.56% End of Year 14 $152,500 5.56% End of Year 15 $152,500 5.56% End of Year 16 $152,500 5.56% End of Year 17 $152,500 5.56% End of Year 18 $152,500 5.56% Total Cash Flow (with loan extension through initital lease term) $3,325,000 First Renewal Option Year 1-2031 $152,500 5.56% Year 2-2032 $152,500 5.56% Year 3-2033 $152,500 5.56% Year 4-2034 $152,500 5.56% Year 5-2035 $152,500 5.56% Total Cash Flow (with loan extension through initital lease term) $3,987,500 Notes [*] Loan can be paid off without penalty at EOY 9. This model assumes the current loan is extended through 2/2035 with the 7.75%
For more information, please contact: JASON POWELL, CCIM Vice President, Investment Sales 770.913.3952 jpowell@ackermanco.net ANDREW MURPHY Senior Vice President, Investment Sales 770.913.3950 amurphy@ackermanco.net 2011 Ackerman & Co. All rights reserved.