The previously posted sale of the DeSiard Street Walmart represents an example where there is a national market of investors searching for a return on their investment through NNN leased properties.
Based on a listing price of $12,520,392 by Marcus & Millichap, the listing cap rate was 5.10%, which indicates a first year net operating income of $638,540. This is a 20 year, modified NNN lease expiring in 2035. (landlord: roof and structure only)
If the income is level over the primary term, an actual sale price of $11,935,327 indicates an overall capitalization rate of 5.35%. Lower cap rates are normally associated with newer properties that are occupied by high credit tenants and / or anticipated increases in income / value over the holding period.
Other common “build to suit” examples with lower cap rates are: Dollar General, Family Dollar, Walgreens, along with many other national retailers.
While the return “on” investment (annual return on investment) may appear to be low risk based on the strength of a company, the return “of” investment (recapture of investment upon sale of the property) can sometimes be significantly less than the price paid when the tenant vacates the building. The point is there are many factors driving the sale price when long term lease contracts are in place.
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Sold: Neighborhood Walmart / DeSiard Street / Monroe, LA
Date: Feb. 20, 2018
Price: $11,935,327
Seller: Polestar La Monroe Desiard LLD
Buyer: Terraza 8 LLC (principle office in California)
This is a build to suit project completed by the seller for Walmart. This sale is a leased fee transaction with the right of occupancy held by Walmart. The purchase price is based on the anticipation of rental income over the lease term.
Note: All information is for reference only and should not be relied upon without proper verification.
Source: The Legal Recorder / OP Tax Assessor / LA Secretary of State database
