Walgreen’s Portfolio · 2020-03-09 · The information contained in this Offering Memorandum is confidential, furnished solely for the purpose of review by a prospective purchaser

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Confidential Offering Memorandum

A Net Lease Investment Opportunity

Representative Photo

Zero Cash Flow LeaseholdsWalgreen’s Portfolio

Confidential Offering MemorandumA Net Lease Investment Opportunity

CONFIDENTIALITY & RESTRICTED USE AGREEMENT

The information contained in this Offering Memorandum is confidential, furnished solely for the purpose of review bya prospective purchaser of the Walgreens Zero Cash Flow Portfolio in GA, OH, ID, PA, AZ, FL, NY, and MI presentedherein (the “Property,” or “Properties,” or ”Portfolio”) and is not to be used for any other purpose or made availableto any other person without the express written consent of The Net Lease Group, LLC. (“NLG”). The material is basedin part upon information supplied by Owner and in part upon information obtained by The Net Lease Group fromsources it deems reasonably reliable. Summaries of any documents are not intended to be comprehensive or allinclusive but rather only an outline of some of the provisions contained therein. No warranty or representation,expressed or implied, is made by Owner, The Net Lease Group, or any of their respective affiliates, as to theaccuracy or completeness of the information contained herein or any other written or oral communication transmittedto a prospective purchaser in the course of its evaluation of the Portfolio. No legal liability is assumed or implied inconnection with the information or such other communications. Without limiting the generality of the foregoing, theinformation shall not be deemed a representation of the state of affairs of any Property or constitute an indicationthat there has been no change in the business or affairs of any Property since the date of preparation of theinformation. Prospective purchasers should make their own projections and conclusions without reliance upon thematerials contained herein and conduct their own independent due diligence, including engineering and environmentalinspections, to determine the condition of any Property and the existence of any potentially hazardous materiallocated at the site.This Offering Memorandum was prepared by The Net Lease Group and has been reviewed by the Owner. It containsselect information pertaining to each Property and does not purport to be all inclusive or to contain all of theinformation which a prospective purchaser may desire. All financial projections are provided for general referencepurposes only and are based on assumptions relating to the general economy, competition and other factors beyondcontrol and, therefore, are subject to material change or variation. An opportunity to inspect any Property will bemade available to qualified prospective purchasers.In this Offering Memorandum, certain documents and other materials are described in summary form. The summariesdo not purport to be complete nor, necessarily, accurate descriptions of the full agreements involved, nor do theyconstitute a legal analysis of such documents. Interested parties are expected to independently review all documents.This Offering Memorandum is subject to prior placement, errors, omissions, changes or withdrawal without notice anddoes not constitute a recommendation, endorsement or advice as to the value of any Property by The Net LeaseGroup or the Owner. Each prospective purchaser is to rely upon its own investigation, evaluation and judgment as tothe advisability of purchasing any Property described herein.Owner and The Net Lease Group expressly reserve the right, at their sole discretion, to reject any or all expressionsof interest or offers to purchase the Property and/or to terminate discussions with any party at any time with orwithout notice. Owner shall have no legal commitment or obligation to any interested party reviewing this OfferingMemorandum or making an offer to purchase any Property unless a written agreement for the purchase of saidProperty has been fully executed and delivered by the Owner and such party and any conditions to Owner’sobligations thereunder have been satisfied or waived and then only to the extent expressly provided for therein. TheNet Lease Group is not authorized to make any representations or agreements on behalf of Owner.This Offering Memorandum is the property of The Net Lease Group and may be used only by parties approved byThe Net Lease Group and Owner. The Portfolio is privately offered and, by accepting delivery of this OfferingMemorandum, the party in possession hereof agrees (i) to return it to The Net Lease Group immediately upon requestof The Net Lease Group or Owner and (ii) that this Offering Memorandum and its contents are of a confidentialnature and will be held and treated in the strictest confidence. No portion of this Offering Memorandum may becopied or otherwise reproduced or disclosed to anyone without the prior written authorization of The Net LeaseGroup and Owner.

The terms and conditions set forth above apply to this Offering Memorandum in its entirety.

3350 Riverwood Parkway, Suite 700Atlanta, GA 30339

thenetleasegroup.com

Philip WickstromManaging [email protected]

Esmael HillManaging [email protected]

Evan [email protected]

EXCLUSIVELY MARKETED BY

Executive Summary

Investment Highlights

Portfolio Overview

Tenant Overview

Locations Overview

The Offering

Tenant SummaryTenant Facts & Figures

CONTENTS

Map and DemographicsLease & Loan SummaryTrade Area Aerial

Paydown-ReadvancePricing SummaryMap of PropertiesLease & Loan Summary

Bid Instructions


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The Net Lease Group is pleased to exclusively offer for sale a portfolioof seven (7) zero cash flow Walgreens leasehold retail properties within-place, fully amortizing, assumable, zero cash flow debt financing. Theproperties are located in Georgia, Ohio, Idaho, Pennsylvania, Arizona,New York, and Michigan.

Each property is 100% leased to Walgreens through a bondable triplenet lease that is guaranteed by the Walgreen Company and providesthat there will be no rent abatement or Landlord responsibilitieswhatsoever. The tenant is responsible for all costs to operate, maintainand repair the property including taxes, insurance, and assessments.

Depending on the pool, the mortgage debt will be fully amortized onNovember 25, 2039 or April 25, 2039 and all rent will then be paid tothe landlord as NOI/Free Cash Flow after this date.

The portfolio offers the investor flexibility to satisfy a range of debt andequity exchange needs due to the highly leveraged structure and lowpercentage of required equity.

After closing, the investor can extract its excess equity from thetransaction free of tax liability per the paydown re-advance featurecontained in the debt documents.

In addition, the mortgage interest deduction and depreciation of theimprovements may generate passive losses that the investor may use tooffset passive gains from other assets to potentially reduce the investor’soverall tax liability.

The properties are available to be purchased individually or as aportfolio.


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PURCHASE PRICE: $20,400,035LOAN BALANCE: $17,471,396REQUIRED EQUITY: $ 2,928,639

EXECUTIVE SUMMARYTHE OFFERING

EXECUTIVE SUMMARYINVESTMENT HIGHLIGHTS

*Representative Photo

Zero Cash Flow, Bondable Triple Net LeasesThe leases are bondable, triple net leases with no landlord responsibilities whatsoever.The tenant is responsible for all taxes, insurance, maintenance, repair and operatingcosts associated with the property. Further, the leases are bondable with noabatement of rent occurring under any circumstance, including casualty events whichdemand the tenant restore improvements to their previous condition.

Scalability to Satisfy Exchange Needs of All SizesThis portfolio of properties offers ease of scalability to satisfy large and smallexchange needs while enabling investors to replace large amounts of debt, if needed.

Paydown Re-Advance FeatureAn investor can satisfy the equity and debt portion of their exchange through theacquisition and subsequently extract excess equity over the required purchase equitywithout tax liability.

Passive Losses Can Offset Passive Income to MitigateTax LiabilityThe passive losses generated by the zero cash flow structure may enable an investorto offset or reduce passive income, and thereby reduce the investor’s tax liability.

Potential Appreciation of the Real EstateThrough its site selection process, Walgreens selects strategic and valuable locationsthat tend to appreciate over time.

Corporate GuarantyAll the leases are completely guaranteed by Walgreen Company (NYSE: WBA), aninvestment grade tenant (S&P: BBB/Stable) with Annual Revenues exceeding $137Billion.

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A Section 1031 Exchange Investor in the Walgreens property orproperties can utilize the paydown-readvance feature of theexisting debt to cover any debt and equity requirementsassociated with the trade, and extract cash from the transaction.The following hypothetical illustrates how the paydown-readvance feature could be utilized:

HYPOTHETICAL An Investor with a $20.4 million downleg trade($16.56 million of equity and $3.84 million of debt) is seekinga property or properties to acquire in order to accomplish anI.R.C. Section 1031 Exchange.

SOLUTION The Investor can purchase the Walgreens Portfolio byassuming the in-place debt of $17.47 million and investing therequired equity of $2.93 million.

STEP ONE The Investor’s $16.56 million of equity is applied to thepurchase of the Walgreens Portfolio which covers the requiredequity of the transaction.

STEP TWO $13.63 million of the Investor’s equity (the excess ofthe Investor’s $16.56 million of equity from the downleg tradeover the $2.93 million required to purchase the WalgreensPortfolio) is applied to temporarily paydown the current debtbalance of the portfolio. The resulting interim debt balance is$3.84 million, which covers the replacement debt required tosatisfy the Investor’s exchange.

STEP THREE The debt is readvanced from the interim debtbalance of $3.84 million to the previous debt balance of$17.47 million, and the Investor’s $13.63 million of excessequity is return to the Investor without any tax liability.

THE RESULT The Investor has satisfied 100% of his exchangeneed (both debt and equity) and extracted $13.63 million ofnon-taxable cash proceeds to be used as the Investor chooseswithout any tax liability.

Representative Photo 3Representative Photo

PORTFOLIO OVERVIEWPAYDOWN-READVANCE

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PORTFOLIO OVERVIEWPRICING SUMMARY

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STORE NUMBER

STREET ADDRESS CITY STATE LEASE COMENCEMENT LEASE EXPIRATIONLEASEHOLD ANNUAL

RENTLOAN BALANCE

(3/25/20)REQUIRED EQUITY PURCHASE PRICE

11994 2225 E Walnut Ave Dalton GA April 3, 2014 August 30, 2068 $174,019 $2,107,511 $347,739 $2,455,250

12083 1444 W 5th Ave Columubs OH April 3, 2014 April 29, 2084 $246,140 $2,982,688 $492,144 $3,474,832

12123 3395 S Federal Way Boise ID April 3, 2014 October 30, 2033 $197,283 $2,389,815 $394,319 $2,784,134

SUB TOTAL $7,480,014 $1,234,202 $8,714,216

* Must be purchased together

STORE NUMBER

STREET ADDRESS CITY STATE LEASE COMENCEMENT LEASE EXPIRATIONLEASEHOLD ANNUAL

RENTLOAN BALANCE

(3/25/20)REQUIRED EQUITY PURCHASE PRICE

11461 800 E Lincoln Hwy Coatesville PA November 7, 2014 October 31, 2086 $248,454 $3,242,932 $535,084 $3,778,016

10505 2785 N. Pinal Avenue Casa Grande AZ November 7, 2014 April 30, 2088 $177,921 $2,320,395 $382,865 $2,703,260

15192 710 150th Ave Madeira Beach FL November 7, 2014 December 31, 2087

12577 25201 Wesley Chapel Road Lutz FL November 7, 2014 February 29, 2084

11377 6709 Pittsford Palmyra Road Fairport NY November 7, 2014 December 31, 2055 $175,821 $2,292,926 $424,191 $2,717,117

12534 1301 N U.S. Highway 31 Petoskey MI November 7, 2014 September 30, 2083 $163,757 $2,135,130 $352,296 $2,487,426

*POOL A PRICING SUMMARY

Closed

Closed

POOL B PRICING SUMMARY

SUB TOTAL $9,991,382 $1,694,437 $11,685,819

TOTALS $17,471,396 $2,928,639 $20,400,035

12534

11377

10505

12123

11994

12083 11461

15192

12577

PORTFOLIO OVERVIEWSTORE LOCATIONS

POOL A

POOL B

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PORTFOLIO OVERVIEW


LEASE GUARANTOR Walgreen Company

INITIAL LEASE TERM 35 - 70 Years

LEASE COMMENCEMENT

LEASE EXPIRATION See Lease Summary

LANDLORD RESPONSIBILITES None Whatsoever

RENT HOLIDAY None

April 3, 2014

LOAN BALANCE (3/25/2020)

INTEREST RATE 4.46% / 5.15%

LOAN MATURITY DATE

BALLOON BALANCE $0 (Fully Amortizing Loan)

PAYDOWN-READVANCEBorrower can utilize

the paydown-readvance feature

November 25, 2039 / April 25, 2039

$17,471,396

LEASE

LOAN

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TENANT OVERVIEW

Walgreens is headquartered in Deerfield, IL, and is the second largestdrugstore chain in the U.S., with more than 8,100 stores in all 50states, the District of Columbia, Puerto Rico, and the U.S. VirginIslands. In addition, the company operates more than 400 in-store andworksite health and wellness centers that offer immunizations,prevention and wellness programs, as well as treatments for minorinjuries, illnesses and skin conditions, which manages and monitorsongoing health conditions.

Walgreens provides consumer goods, pharmacy and wellness servicesthrough its retail drugstores, direct mail, telephone and onlineplatforms. The company sells prescription and non-prescription drugsand general merchandise including household products, convenienceand fresh foods, personal care, beauty care, photo finishing, as wellas home medical equipment, contact lenses, vitamins, supplements andother health and wellness solutions. Walgreens also provides specialtypharmacy services for managing complex and chronic healthconditions.

On a 30-day adjusted basis in fiscal year 2018, Walgreens filled 1.1billion prescriptions (including immunizations). With stores locatedwithin five-miles of approximately 78 percent of Americans, andthrough popular online offerings and its award-winning mobile app,Walgreens interacts with 8 million customers per day.

Traded on the NASDAQ under the ticker WBA (S&P: BBB), Walgreensreported annual revenues of $137 billion and net income of $3.98billion for fiscal year 2019.


GUARANTOR Walgreen Co.

HEADQUARTERS Deerfield, IL

STOCK SYMBOL WBA

CREDIT RATING BBB

BUISNESS Retail Pharmacy

LOCATIONS 8,110 +

ANNUAL REVENUE $137 Billion

NET INCOME $3.98 Billion

EARNINGS/SHARE (TTM) $4.06

WEBSITE www.walgreens.com

TENANT SUMMARY

SUMMARY

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TENANT OVERVIEW


FACTS AND FIGURES9,560 PHARMACY STORE LOCATIONS Walgreens has more than 9,560 retail drug stores in all 50 states, the District of Columbia, Puerto

Rico and the U.S. Virgin Islands.

245,000+ EMPLOYEES Walgreens employs more than 245,000 colleagues across all 50 states, Washington, D.C., Puerto Rico and the U.S.

Virgin Islands.

1.1 BILLION PRESCRIPTIONS Walgreens fills or manages 1.1 billion prescriptions on a 30-day adjusted basis in 2018.

85,000 HEALTHCARE SERVICE PROVIDERS Walgreens has more than 85,000 healthcare service providers, including pharmacists, pharmacy

technicians, nurse practitioners and other health-related professionals.

87 MILLION BALANCE REWARD MEMBERS Walgreens has approximately 87 million Balance Reward active members as of August 2016.

8 MILLION CUSTOMERS SERVED DAILY Every day, Walgreens serves 8 million customers in its retail pharmacies and on-line.8

LOCATION OVERVIEWDALTON, GA

LEASE SUMMARY

LOAN SUMMARYDEMOGRAPHICS 1 MILE 3 MILES 5 MILES

TOTAL POPULATION 5,808 33,321 63,818

MEDIAN HOUSEHOLD INCOME $41,478 $44,282 $49,526

PERCENTAGE OF POPULATION 45+ 32.4% 33.6% 36.7%

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STREET ADDRESS 2225 East Walnut Avenue

CITY, STATE Dalton, GA

STORE NUMBER 11994

LAND AREA (ACRES) 1.7

BUILDING SIZE (SQUARE FEET) 14,000

YEAR BUILT 2008

LEASE GUARANTOR Walgreen Co.

LEASE COMMENCEMENT

LEASE EXPIRATION

FIRST TERMINATION OPTION

LEASEHOLD ANNUAL RENT


RENT HOLIDAY None

GROUND LEASE COMENCEMENT

GROUND LEASE EXPIRATION

ANNUAL GROUND RENT


$198,000

August 31, 2033

April 3, 2014

August 30, 2068

April 30, 2039

$174,019

August 17, 2008

August 31, 2068


INTEREST RATE 5.15%

LOAN MATURITY DATE

$2,107,511

April 25, 2039

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LEASE SUMMARY

LOAN SUMMARYLOAN BALANCE (3/25/20)

INTEREST RATE 5.15%

LOAN MATURITY DATE

$2,982,688

April 25, 2039

DEMOGRAPHICS 1 MILE 3 MILES 5 MILES




LOCATION OVERVIEWCOLUMBUS, OH

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STREET ADDRESS 1444 West 5th Avenue

CITY, STATE Columbus, OH

STORE NUMBER 12083



YEAR BUILT 2008


LEASE COMMENCEMENT

LEASE EXPIRATION




RENT HOLIDAY None



ANNUAL GROUND RENT


$175,000

April 30, 2033

April 3, 2014

April 29, 2084

April 30, 2039

$246,140

April 30, 2009

April 30, 2084

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LEASE SUMMARY

LOAN SUMMARYLOAN BALANCE (3/25/20)

INTEREST RATE 5.15%

LOAN MATURITY DATE

$2,389,815

April 25, 2039





LOCATION OVERVIEWBOISE, ID

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STREET ADDRESS 3395 South Federal Way

CITY, STATE Boise, ID

STORE NUMBER 12123



YEAR BUILT 2008


LEASE COMMENCEMENT

LEASE EXPIRATION

OPTION PERIODS



RENT HOLIDAY None



ANNUAL GROUND RENT

OPTION PERIODS

$175,500

Five Ten-Year Options

April 3, 2014

October 30, 2033

Five Ten-Year Options

$197,283

October 13, 2008

October 31, 2033

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LEASE SUMMARY

LOAN SUMMARY

LOCATION OVERVIEWCOATESVILLE, PA

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STREET ADDRESS 800 E Lincoln Hwy

CITY, STATE Coatesville, PA

STORE NUMBER 11461



YEAR BUILT 2008


LEASE COMMENCEMENT

LEASE EXPIRATION




RENT HOLIDAY None



ANNUAL GROUND RENT


$220,000

October 31, 2036

November 7, 2014

October 31, 2086

November 30, 2039

$248,454

January 1, 2011

October 31, 2086


INTEREST RATE 4.46%

LOAN MATURITY DATE

$3,242,932

November 25, 2039





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LEASE SUMMARY

LOAN SUMMARY

LOCATION OVERVIEWCASA GRANDE, AZ

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STREET ADDRESS 2785 N. Pinal Avenue

CITY, STATE Casa Grande, AZ

STORE NUMBER 10505



YEAR BUILT 2008


LEASE COMMENCEMENT

LEASE EXPIRATION




RENT HOLIDAY None



ANNUAL GROUND RENT


November 7, 2014

April 30, 2088

November 30, 2039

$177,921

$140,000

April 30, 2088

April 30, 2033

April 30, 2008


INTEREST RATE 4.46%

LOAN MATURITY DATE

$2,320,395

November 25, 2039






• Edit Master text styles• Second level

• Third level

• Fourth level

• Fifth level


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LEASE SUMMARY

LOAN SUMMARY

LOCATION OVERVIEWFAIRPORT, NY

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STREET ADDRESS 6707 Pittford Palmyra Road

CITY, STATE Fairport, NY

STORE NUMBER 11377



YEAR BUILT 2010


LEASE COMMENCEMENT

LEASE EXPIRATION




RENT HOLIDAY None



ANNUAL GROUND RENT


$262,500

December 31, 2031

November 7, 2014

December 31, 2055

November 30, 2039

$175,821

December 29, 2006

December 31, 2055


INTEREST RATE 4.46%

LOAN MATURITY DATE

$2,364,233

November 25, 2039







• Third level

• Fourth level

• Fifth level


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LEASE SUMMARY

LOAN SUMMARY

LOCATION OVERVIEWPETOSKEY, MI

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STREET ADDRESS 1301 N U.S. Highway 31

CITY, STATE Petoskey, MI

STORE NUMBER 12534



YEAR BUILT 2008


LEASE COMMENCEMENT

LEASE EXPIRATION




RENT HOLIDAY None



ANNUAL GROUND RENT


$176,000

September 30, 2033

November 7, 2014

September 30, 2083

November 30, 2039

$163,757

September 29, 2008

September 30, 2083


INTEREST RATE 4.46%

LOAN MATURITY DATE

$2,135,130

November 25, 2039


TOTAL POPULATION 728 8,038 15,931





• Third level

• Fourth level

• Fifth level


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BID INSTRUCTIONS

All purchase offers must be submitted to The Net Lease Groupand should include written responses to the following:

1. Confirm that the Purchaser will assume the in-place debt.

2. Indicate the amount of equity over the debt and the resulting purchase price being offered by the investor.

3. Seller will pay for Seller’s legal costs and brokerage commissions. Purchaser is responsible for Purchaser’s legal costs and all other closing costs.

4. Provide the name of the firm(s)/attorney(s) that will act as legal counsel for the Purchaser.

5. Provide the Purchaser’s source of equity that will be used to make the acquisition.

6. Provide the Purchaser’s relevant history and experience acquiring zero cash flow assets.

Please contact us with any questions or comments.

Representative Photo 23


3350 Riverwood Parkway, Suite 700Atlanta, GA 30339

thenetleasegroup.com

Philip WickstromManaging [email protected]

Esmael HillManaging [email protected]

Evan [email protected]

EXCLUSIVELY MARKETED BY

Documents

Walgreen’s Portfolio · 2020-03-09 · The information contained in this Offering Memorandum is confidential, furnished solely for the purpose of review by a prospective purchaser