Actual Walgreens Pharmacy EXCLUSIVE LISTING Walgreens Fresno, California $5,500,000 List Price $3,000,000 Loan Assumption Required Fully Amortized over 17 Years 6.93% Capitalization Rate 8.10% Equity Rate of Return (Cash Return + Principal Reduction Yr-1) 4.03% Cash-on-Cash Return 16+ Years Firm Term Remaining on 75-Year NNN Lease Prime Corner at Major Commercial Intersection in Affluent Neighborhood For more information, please contact: Michael Copeland Managing Partner 925-621-3840 mcopeland@ctbt.com LIC #00898210 Michael Speers Partner 415-677-0467 mspeers@ctbt.com LIC # 00899868 Cassidy Turley Northern California www.ctbtnnn.com
Location 7015 North West Avenue, Fresno, California Northwest corner of West Herndon Avenue & North West Avenue Lot Size Approximately 1.86 Acres 81,022+/- Square Feet Improvements A ±14,820 square foot freestanding Walgreens store with drive through pharmacy pick-up completed in November 2004. pricing Purchase Price $5,500,000 Price Per Square Foot $371 Annual Rental Income $381,230 Capitalization Rate 6.93% loan assumption Assumed Balance (04/01/2013) $3,000,000 Required Equity $2,500,000 Amortization Remaining 16 Years - 7 Months Interest Rate 6.05% annual cash flow Net Operating Income $381,230 Debt Service $280,534 Cash Flow After Debt Service $100,696 Principal Reduction Yr-1 $101,850 Cash Flow + Principal Reduction $202,546 leveraged returns Cash-on-Cash Return 4.03% Equity Rate of Return Yr-1 8.10% (Cash Return + Principal Reduction) LEASE Leased to Walgreens for 75 years on a flat lease commencing November 1, 2004. Walgreens has rights to terminate the lease on October 31, 2029 and every 60 months (five years) thereafter. The lease is a true triple-net lease with the tenant responsible for all building expenses as well as its pro-rata share of shopping center common area expenses, exclusive of center capital improvements and management.
Financing Buyer must assume an existing loan with John Hancock Life Insurance Company with an ending balance of $2,999,628 on April 1, 2013. The initial loan amount of $3,250,000 carries an interest rate of 6.05% and is fully amortized on a 20-year schedule with a start date of July 1, 2010 and ending July 1, 2030. Subject to a prepayment penalty, the borrower may prepay the loan on or after August 1, 2018. There is a 1.0% assumption fee. Original Loan Amount $3,250,000 Current Loan Balance (as of 04/01/2013) $2,999,628 Loan to Value Ratio 55% Amortization 20-Year Interest Rate 6.05% Monthly Loan Service $ 23,378 Annual Loan Service $ 280,534 principal reduction Loan payments attributed to principal reduction in Year 1 totals $101,850 or 4.07% of the assumed loan balance. Combined with a 4.03% annual cash on cash return, the investor achieves an effective 8.10% equity rate of return during the first year of the hold period. Over the remaining firm term of Walgreen s lease, the reduction of principal will total $2.82 million, equivalent to a pay off rate averaging 5.7% per year in addition to the 4.03% annual cash yield. amortization summary Firm Term Time Period 5 Years 10 Years 16+ Years Ending Nov-17 Nov-22 Nov-29 Ending Balance $2,477,932 $1,717,512 $182,850 Principal Reduction (Total) $521,696 $1,282,116 $2,816,778 Principal Reduction (%) 17.4% 42.7% 93.9% Average per Year (%) 3.8% 4.5% 5.7%
PERCENTAGE RENT The tenant pays the higher of fixed rent or percentage rent. This lease has the standard Walgreens percentage rent clause. The percentage rent calculation is 2% of general sales and 0.5% of food and prescription sales (excluding third party prescription plans). Real estate taxes and insurance costs are then deducted from this, the net amount after this reduction being the percentage rent. If the percentage rent is higher than the fixed rent, Walgreens pays the higher amount, but in no case will rent be more than twice the fixed rent. Notwithstanding the paragraph above, it is unlikely that Walgreens will ever pay percentage rent on this store or any store. The calculated percentage rent, which excludes prescriptions covered by Insurance, HMO s or Medicare, is far too difficult to reach. tenant History Walgreens was founded in Chicago, Illinois in 1901, and has since expanded throughout the United States. Its headquarters is located in the nearby suburb of Deerfield, Illinois. Incorporated in 1909, Walgreen Co. (NYSE: WAG) is the largest drugstore chain in the United States. The company is ranked #32 in the Fortune 500 and #199 in the FT Global 500. Standard & Poor s gives Walgreen Inc. a long-term debt rating of A. Walgreens offers a time-honored fiscal fitness tonic: quality over quantity and homespun growth rather than growth through acquisitions. Prescription drugs account for about two-thirds of sales; the rest comes from general merchandise, over-the-counter medications, cosmetics, and groceries. Walgreens usually builds rather than buys stores so it can pick prime locations. Most stores offer drivethrough pharmacies; almost all offer one-hour photo processing. In 2010 Walgreens acquired drugstore chain Duane Reade and the ApothecaryRx pharmacies of Graymark Healthcare. Operations As of February 29, 2012 Walgreens operated 8,290 locations in all 50 states, the District of Columbia, Puerto Rico and Guam. The company has 7,841 drugstores nationwide; including 354 worksite health and wellness centers, 82 Infusion and respiratory services facilities, 11 specialty pharmacies, and 2 mail service facilities. Walgreens also operates worksite health centers, home care facilities, and specialty and mail service pharmacies. Its Take Care Health Systems subsidiary manages more than 363 in-store convenient care clinics and worksite health and wellness centers.
TENANT (Continued) Earnings Net earnings for the quarter ended February 29, 2012 were $683 million or $.78 per diluted share. This was a 7.7% decrease in net earnings over the same quarter last year. The net earnings decrease in the quarter was primarily attributable to lower sales growth and higher selling, general and administrative expenses as a percentage of sales. Operations at drugstore.com, including costs associated with the acquisition and integration, reported a pre-tax loss of $9 million, $6 million after tax. Prior year earnings included pre-tax Rewiring for Growth expenses of $6 million, $4 million after tax. For the six month period ended February 29, 2012, net earnings decreased 6.3% to $1,237 million or $1.41 per diluted share. The net earnings decrease for the six month period was primarily attributable to lower sales growth, lower margins and higher selling, general and administrative expenses as a percentage of sales. Operations at drugstore.com, including costs associated with the acquisition and integration, reported a pre-tax loss of $20 million, $13 million after tax, or $.01 per diluted share. Prior year earnings included pre-tax Rewiring for Growth expenses of $14 million, $9 million after tax, or $.01 per diluted share ($13 million of restructuring and restructuring related expenses and $1 million in margin dilution). SaleS Net sales for the quarter ended February 29, 2012 increased by 0.8% to $18.7 billion. For the six month period ended February 29, 2012, net sales increased 2.7% to $36.8 billion. The acquisition of drugstore.com increased total sales by 0.8% in the current quarter and six month periods. Year to date drugstore sales increases resulted from sales gains in existing stores and added sales from new stores, each of which include an indeterminate amount of market-driven price changes. Partially offsetting drugstore sales gains was Walgreens strategic decision to no longer be a part of the Express Scripts pharmacy provider network. Sales in comparable drugstores were down 1.5% in the quarter, but increased 0.4% for the six month period ended February 29, 2012. Relocated and acquired stores are not included as comparable stores for the first twelve months after the relocation or acquisition.
TENANT (CONTINUED) Sales (Continued) Prescription sales decreased by 1.7% in the quarter and increased by 1.3% for the first six months and represented 61.0% and 63.2% of total sales. In the prior year, prescription sales increased 7.7% in the quarter and 6.5% year to date and represented 62.6% and 64.1% of total net sales. Comparable drugstore prescription sales decreased 3.9% in the current quarter and 0.7% for the six month period. The effect of generic drugs, which have a lower retail price, replacing brand name drugs reduced prescription sales by 2.1% in the current quarter and 2.0% for the first six months versus 2.8% and 2.9% in the same periods last year. The effect of generics on total net sales was a reduction of 1.1% in the current quarter and year to date compared to 1.6% and 1.7% in the quarter and six month periods last year. Prescription sales also were negatively impacted by its strategic decision to no longer be a part of the Express Scripts pharmacy provider network. Third party sales, where reimbursement is received from managed care organizations, the government, employers or private insurers, were 95.7% of prescription sales for the quarter and the first six months compared to 95.5% for the quarter and 95.4% for the first six months last year. The total number of prescriptions filled for the current quarter (including immunizations) was approximately 167 million compared to 181 million for the same period last year. Prescriptions adjusted to 30 day equivalents were 196 million in the current quarter versus 205 million in last year s quarter. Gross Profit Gross margin as a percent of sales was 28.9% in the current quarter and 28.5% for the first six months compared to 28.8% and 28.6% last year. Front-end margins were higher compared to the prior year s quarter and six month period. Front-end gross margin percentages were positively impacted by the convenience and fresh foods, household items and personal care categories. Retail pharmacy margins were flat in the quarter but down for the six month period. Lower market driven reimbursements continue to offset the positive effect of generic drug sales in the current quarter and six month periods. New generic introductions, including generic Lipitor, are expected to positively contribute to pharmacy gross margins in the second half of fiscal 2012. Non-retail business and a higher provision for LIFO also negatively impacted margins in the current quarter and six month periods. Gross profit dollars increased 1.2% over the prior year s quarter and 2.2% over the prior year s six month period. The increases are attributed to increased sales volumes over the prior year. For the six month period, increased sales volumes were partially offset by lower retail pharmacy margins.
SITE INFORMATION The subject property is located at the northwest corner of West Herndon and North West Avenues in the Fresno Commons Shopping Center in Fresno, CA. The center is in the Northwest Fresno neighborhood along the northern border of the city just one mile south of the San Joaquin River. The population in the area is both older and more affluent than Fresno overall. In fact, the subject property is 1.5 miles from the Fig Garden Golf Course and 2.0 miles from the San Joaquin Country Club. The Walgreens sits at the main corner of the Fresno Commons Shopping Center. Fresno Commons also includes a cluster of small medical/professional office suites. Adjacent to the center is Westwood Bluffs, an 88-unit seniors apartment/ condominium complex. Directly across the street are The Market, a high-end grocery store, CVS Pharmacy and the Spectrum Salon & Day Spa. Located 3½ miles northeast is Children s Hospital Central Valley, a state-of-the-art children s hospital on a 50-acre campus with a medical staff of more than 450 physicians. In California, Children s Hospital treats more inpatient cases than any pediatric hospital north of San Diego, making it the second largest children s hospital in the state. The 340-bed facility is one of the 10 largest hospitals of its type in the nation. Kaiser Permanente Fresno Medical Center is 2½ miles east of the subject property. The Kaiser Permanente facility includes acute care, ambulatory medical services, and ambulatory surgery services. West Herndon Avenue is a major arterial route connecting CA State Highway 99 to the east with CA State Highway 41 to the west. DEMOGRAPHICS DEMOGRAPHIC SUMMARY 1-MILE RADIUS 3-MILE RADIUS 5-MILE RADIUS Population in 2011 10,786 87,551 273,081 Households in 2009 4,287 34,602 97,232 Household Growth 2000-2011.51% 7.62% 13.93% Per Capita Income $56,558 $38,739 $30,324 Median Household Income Average Household Income $110,251 $61,643 $56,957 $142,314 $98,020 $85,166
CITY OF FRESNO Fresno is a city in California and is the county seat of Fresno County. As of 2010, the population was estimated at 505,479, making it the fifth largest city in California, the largest inland city in California, and the 35th largest in the nation. Fresno is located in the center of the wide San Joaquin Valley of Central California, approximately 200 miles north of Los Angeles and 170 miles south of the state capital, Sacramento. The city is part of Metropolitan Fresno, which, with a population of 986,516 is the second largest area in the Central Valley after the Sacramento Metropolitan Area. Note The information set forth herein has been received by us from sources we believe to be reliable, but we have made no independent investigation of the accuracy or completeness of the information and make no representations with respect thereto. The above is submitted subject to errors, prior sale or lease, change in status, or withdrawal without notice. Fresno county
PROPERTY PHOTOGRAPHS
East W HERNDON AVENUE NW AVENUE South W HERNDON AVENUE NW AVENUE
aerial north WESTWOOD BLUFFS LUXURY APARTMENTS 88 UNIT SENIOR NW AVENUE FRESNO COMMONS SHOPPING CENTER W HERNDON AVENUE W HERNDON AVENUE DIBUDUO & DEFENDIS INSURANCE BROKERS NW AVENUE MEDICAL / PROFESSIONAL OFFICES
AERIAL SINGLE FAMILY HOMES WESTWOOD BLUFFS NW AVENUE NW AVENUE MEDICAL / PROFESSIONAL OFFICES WEST PARK PROFESSIONAL CENTRE SINGLE FAMILY HOMES W HERNDON AVENUE SINGLE FAMILY HOMES MEDICAL / PROFESSIONAL OFFICES N FRUIT AVENUE N FRUIT AVENUE ALLIED GRAPE GROWERS NELSON ELEMENTARY SCHOOL MEDICAL / PROFESSIONAL OFFICES
Map Subject CALIFORNIA STATE UNIVERSITY FRESNO FRESNO YOSEMITE INTERNATIONAL AIRPORT 0 mi 2 4 6 8
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Updated Summary Report (%) June 29, 2012 Longitude: -119.82645990 Latitude: 36.83744030 1 mi Ring 3 mi Ring 5 mi Ring POPULATION 1990 Total Population 10,006 71,143 189,747 2000 Total Population 10,732 81,350 239,682 2011 Total Population 10,786 87,551 273,081 2016 Total Population 11,423 93,382 294,218 % Population Change 1990-2000 7.26% 14.35% 26.32% % Population Change 2000-2011.51% 7.62% 13.93% % Population Change 2011-2016 5.90% 6.66% 7.74% HOUSEHOLDS 1990 Total Households 3,554 27,922 72,018 2000 Total Households 4,116 32,963 88,522 2011 Total Households 4,287 34,602 97,232 2016 Total Households 4,427 35,934 102,245 % Households Change 1990-2000 15.81% 18.05% 22.92% % Households Change 2000-2011 4.15% 4.97% 9.84% % Households Change 2011-2016 3.27% 3.85% 5.15% 2011 RACE % 2011 White Population 76.76% 66.16% 59.35% % 2011 Black Population 3.65% 6.76% 7.43% % 2011 American Indian/Alaska Native.70% 1.17% 1.46% % 2011 Asian/Hawaiian/Pacific Islander 6.74% 7.47% 9.98% % 2011 Other Population (Incl 2+ Races) 12.14% 18.43% 21.78% % 2011 Hispanic Population 19.94% 30.85% 36.74% % 2011 Non-Hispanic Population 80.06% 69.15% 63.26%
Updated Summary Report (%) June 29, 2012 Longitude: -119.82645990 Latitude: 36.83744030 1 mi Ring 3 mi Ring 5 mi Ring INCOME 2011 Per Capita Income $56,558 $38,739 $30,324 2011 Median Household Income $110,251 $61,643 $56,957 2011 Average Household Income $142,314 $98,020 $85,166 % 2011 Household Income < $10,000 1.87% 3.48% 4.75% % 2011 Household Income $10,000-$14,999.84% 4.26% 5.40% % 2011 Household Income $15,000-$19,999 1.35% 4.15% 4.97% % 2011 Household Income $20,000-$24,999 1.94% 3.89% 4.78% % 2011 Household Income $25,000-$29,999 2.36% 5.02% 5.12% % 2011 Household Income $30,000-$34,999 1.91% 5.05% 5.21% % 2011 Household Income $35,000-$39,999 1.35% 5.03% 5.00% % 2011 Household Income $40,000-$44,999 2.36% 5.27% 4.73% % 2011 Household Income $45,000-$49,999 2.31% 3.83% 4.44% % 2011 Household Income $50,000-$59,999 7.63% 8.88% 8.04% % 2011 Household Income $60,000-$74,999 8.47% 10.41% 10.41% % 2011 Household Income $75,000-$99,999 13.16% 10.70% 13.32% % 2011 Household Income $100,000-$124,999 10.89% 8.01% 8.55% % 2011 Household Income $125,000-$149,999 13.16% 6.36% 5.02% % 2011 Household Income $150,000-$199,999 12.57% 7.92% 5.19% % 2011 Household Income $200,000-$249,999 6.30% 2.86% 1.89% % 2011 Household Income $250,000-$499,999 7.42% 3.76% 2.61% % 2011 Household Income $500,000+ 4.13% 1.12%.56% 2011 Average Household Size 2.5 2.5 2.8 % 2011 Total Owner Occupied Housing Units 77.10% 53.51% 55.44% % 2011 Total Renter Occupied Housing Units 22.90% 46.49% 44.56% 2011 Total Daytime Population 9,361 100,481 260,174 2011 Total Daytime Work Population 4,274 57,242 119,617 2011 Total Establishments 459 6,290 13,075