Walmart – Desiard / Analysis

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.

Have questions?   Contact us at 318-387-9092 to discuss.

Mike Graham Real Estate and Appraisals