DRUGSTORE PROPERTY NEWSLETTER SECOND QUARTER 216 Drugstore Property Sale Comparables National Drugstore Property Market Analysis page 1 DRUGSTORE PROPERTY NEWSLETTER SECOND QUARTER 216 216 Pharma Property Group
SELECTED SALES COMPARABLES Property City Property State Sale Price Actual Cap Rate Lease Term Remaining NN / NNN Mesa AZ $2,125, 7.22 3 NN Everett WA $4,15, 7.4 1 NN North Hills CA $9,66, 4.9 14 NNN Kinston NC $5,4, 5.82 15.5 NNN Madisonville KY $5,611,111 5.8 16 NNN Roanoke VA $6,377,551 5.88 18 NNN Sauk Rapids MN $11,517,857 5.6 2.5 NNN Property City Property State Sale Price Actual Cap Rate Lease Term Remaining NN / NNN Haines City FL $4,285,939 6.5 4 NN Perry GA $2,815, 6.64 8 NN Minneapolis MN $2,756, 6.65 13 NNN Oxnard CA $8,1, 5.31 13.5 NNN Madison AL $2,715, 5.75 14 NNN Bartow FL $6,45, 6.61 14 NNN Lago Vista TX $6,355,16 5.95 15 NNN Glenmont NY $8,16, 5.17 24 NNN Property City Property State Sale Price Actual Cap Rate Lease Term Remaining NN / NNN Mount Juliet TN $2,4, 8.51 2 NNN Sinking Spring PA $3,476, 7.25 3 NNN Moreno Valley CA $5,, 5.65 7.5 NNN Comparable property sales data has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. www.pharmapropertygroup.com 5328 Banks Street, Ste. B, San Diego, CA 9211 page 2
COMPARING THE FIRST SIX MONTHS OF 215 & 216 Drugstore Transactions Volume Median Days-on-Market Before Closing 1Q & 2Q 215 122 169 1Q & 2Q 215 168 146 1Q & 2Q 215 13 142 1Q & 2Q 215 125 168 1Q & 2Q 215 47 76 178 1Q & 2Q 215 153 Comparable property sales data has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. 27.4% PERCENTAGE OF BUYERS BASED IN CALIFORNIA YEAR 213 214 215 216-YTD AVG. Number of Transactions* 335 43 421 116 326 % of Buyers based in CA 3. 25.5 27.7 28. 27.4 * Walgreens transactions nationwide. 27.4% of all Walgreens sold nationwide are purchased by buyers based in California.A page 3 DRUGSTORE PROPERTY NEWSLETTER SECOND QUARTER 216 216 Pharma Property Group
MARKET UPDATE Drugstore market transaction velocity has slowed during the first and second quarters of 216. There are a variety of reasons for this; however, the primary factor is the continued progression of the possible Walgreens and Rite Aid merger. In late May 216, Walgreens announced the pricing of a $6 billion debt offering to finance the proposed acquisition of Rite Aid, to retire a portion of Rite Aid's existing debt and any remaining net proceeds from the sale of the notes may also be used for general corporate purposes. The debt offering consisted of the following notes: $1.25 billion 1.75% notes due 218; $1.5 billion 2.6% notes due 221; $75 million 3.1% notes due 223; $1.9 billion 3.45% notes due 226; and Much of the mid-term leased drugstores (12 to 18 years) with below average sales have been stagnant and sitting on the market which has increased supply; however, drugstores with average or better sales with decent real estate are still trading with ease and at aggressive CAP rates when compared to the last decade of trading. The drugstore lending environment has remained healthy as ten year treasury yield rates have remained consistent since the end of the first quarter in the 1.6% to 1.9% range. Lenders are beginning to examine drugstore sales and real estate fundamentals a bit more thoroughly for midterm leased drugstores than in the past primarily due to the recent mergers and expected mergers of drugstore chains and the expected store consolidations to follow. Highest Regards, $6 million 4.65% notes due 246. Although drugstores are requiring more days on the market to trade, pricing levels continue to be near all-time highs when comparing drugstore CAP rate levels to the last ten to fifteen years. CVS has recently performed portfolios of sale leasebacks on some of their corporate real estate to private equity firms. These PE firms are now selling off tranches of these portfolios through individual sales at the 5 CAP to 5.15 CAP levels. The primary driver for this pricing is that the leases are freshly signed 25 year absolute triple net leases. JASON STUART PONGSRIKUL Managing Principal PHARMA PROPERTY GROUP www.pharmapropertygroup.com 5328 Banks Street, Ste. B, San Diego, CA 9211 page 4
EXCLUSIVELY LISTED BY PHARMA PROPERTY GROUP Offering Overview Price: $6,416,19 Asking Cap Rate: 5.45% Annual Income: $35, Building Square Feet: 14,49 Land Square Feet: 22,215 Year Built: 25 WALGREENS INVESTMENT OFFERING 441 JEFFERSON STREET INDIO, CA 9221 ABSOLUTE TRIPLE NET LEASE LEASE TERM REMAINING SIGNALIZED CORNER LOCATION STRATEGIC CORNER RIVERSIDE-SAN BERNARDINO- ONTARIO MSA LOCATION Absolute triple net lease with no landlord responsibilities whatsoever. Fifteen years of primary lease term remaining before seven (five- year) options to follow. Lease expires 266 and first termination right is in June 231. Drive-thru pharmacy located in an outparcel of the 15, square foot Heritage Court Shopping Center, at the signalized corner of Jefferson Street and Fred Waring Drive with daily traffic counts exceeding 47, vehicles per day. CVS is located directly across the street on the opposite corner, making this signalized intersection a strategic corner for both Walgreens and CVS. Nearest Rite Aid is over four miles away. Riverside County has a population of roughly 2,2, and is included in the Riverside- San Bernardino-Ontario MSA which is the eleventh most populous Metropolitan Statistical Area in the United States page 5 DRUGSTORE PROPERTY NEWSLETTER SECOND QUARTER 216 216 Pharma Property Group
ATLANTIC OCEAN Offering Overview Price: $5,47,391 UC FLORIDA DAYTONA BEACH DAYTONA BEACH HALIFAX RIVER DAYTONA BEACH SHORES Asking Cap Rate: 5.75% Annual Income: $29,225 INDIGO LAKES GOLF CLUB DAYTONA INTERNATIONAL SPEEDWAY DAYTONA BEACH INTERNATIONAL AIRPORT SUBJECT PROPERTY DAYTONA BEACH GOLF CLUB Building Square Feet: 1,98 Land Square Feet: 76,738 Year Built: 21 THE CLUB AT PELICAN BAY EXCLUSIVELY LISTED BY PHARMA PROPERTY GROUP SOUTH DAYTONA CVS INVESTMENT OFFERING 135 BEVILLE ROAD, DAYTONA BEACH, FL 32114 LEASE TERM REMAINING RENT INCREASES STRATEGIC LOCATION EXTREMELY HIGH TRAFFIC COUNTS Approximately ten years of primary lease term remaining before the five (five-year) options to follow. Lease provides for rent increases of approximately two percent at each five year option. Walgreens is located directly across the street on the opposite corner making this signalized intersection a strategic corner for both CVS and Walgreens. There are no Rite Aid stores in Florida. Drive-thru pharmacy located on a signalized corner of Beville Road and South Clyde Morris Boulevard with traffic counts of over 68, vehicles per day. DESIREABLE LOCATION Located within three miles of the Daytona International Airport and the Daytona Speedway, and within minutes of the Intracoastal Waterway. www.pharmapropertygroup.com 5328 Banks Street, Ste. B, San Diego, CA 9211 page 6
POTENTIAL SELLERS / ACTIVE BUYERS BELOW ARE A FEW WAYS HOW PHARMA PROPERTY GROUP DIFFERS FROM TYPICAL BROKERAGE FIRMS Specialization We are the largest private national commercial real estate brokerage firm in the country exclusively focusing on Walgreens, CVS and Rite Aid properties. Our network of active contacts in the drugstore space is unmatched and includes drugstore landlords, brokers, lenders, developers and first time drugstore buyers. Proprietary Drugstore Investor Database For years we have built our proprietary database of existing drugstore owners and we have relationships and contact with the most active drugstore investors in the country. Off Market Sales PPG can bring you offers directly on most drugstores without marketing your property for sale to the open public. We have existing relationships from active buyers that are qualified and who we have closed deals with. Our buyers are looking for either short-term, mid-term or lower yielding long-term leased drugstores and these investors have the ability to purchase cash or assume existing debt allowing ownership to avoid stiff loan payoff penalties. Complimentary Valuation Analysis PPG offers any drugstore landlord a complimentary property analysis for any drugstore in their portfolio. There is no obligation in receiving our analysis and we suggest performing a valuation every couple of years even if selling is not on the horizon. Our analysis includes: Current market value of drugstores in your portfolio. Recently closed drugstore comparables that have similar lease terms to your drugstores. Market analysis of surrounding drugstore competition and how that affects the value of your investment. Compares your drugstore sales performance to other drugstores on a local, statewide and national level. To receive your complimentary analysis, contact us by any of the following ways: Call Jason Pongsrikul, our Managing Principal, at (858) 86-6591 Email Jason Pongsrikul at jp@pharmapropertygroup.com Mail correspondence to: Pharma Property Group 5328 Banks Street Suite B San Diego, CA 9211 Attention: Complimentary Analysis page 7 DRUGSTORE PROPERTY NEWSLETTER SECOND QUARTER 216 216 Pharma Property Group
DRUGSTORE PROPERTY NEWSLETTER SECOND QUARTER 216 Drugstore Property Sale Comparables National Drugstore Property Market Analysis JASON STUART PONGSRIKUL Founder and Managing Principal Direct: (858) 86-6591 Email: jp@pharmapropertygroup.com JASON S. PONGSRIKUL Managing Principal NICHOLAS W. PRICE Vice President LUCAS A. PECKHAM Associate DAVID CHANG Research Analyst MARIA LOW Operations Manager 5328 Banks Street, Suite B San Diego, CA 9211 P 619.297.55 F 619.839.3763 CA BRE Lic. 1918332 www.pharmapropertygroup.com www.pharmapropertygroup.com 5328 Banks Street, Ste. B, San Diego, CA 9211 Commercial Real Estate Investment Services for Walgreens, CVS and Rite-Aid Properties Nationwide page 8