Westwood’s Best Property Picks for 2020
Westwood Net Lease Advisors is firmly rooted in the belief that triple (NNN) investments are one of the best ways to earn income, build wealth, and maintain a solid investment strategy. Why? Investors can earn a healthy monthly income for up to twenty years from a creditworthy tenant and realize plenty of capital-preserving benefits.
So, which NNN tenants and properties make these investments such a suitable option? Though most NNN lease investments are high-quality, we’ve listed our 2020 property oicks here, based on several criteria:
- Reliable long-term income from credit-quality tenants.
- Corporate-guaranteed leases for added reliability and value.
- Recession-proof businesses.
- The ability to evolve with consumer habits and market shifts to stay relevant.
Dollar General
You will see many references to Dollar General in our blogs and case studies – it is Westwood’s #1 NNN property choice for 2020. Dollar General is a steadily growing company, adding around 1000 strategically located properties annually. As an absolute NNN investment, there is stability through consistent growth and increasing year-over-year sales, a high rate of return, and needs-based, recession-protected consumer products and services.
Dollar General stores typically operate under 15-year absolute NNN leases with 10% rent increases every five years during option periods and provide 6-7% cap rates. Given Dollar General properties command a price of anywhere between $1-2 million, it is a great option for the first-time investor, seasoned landlord, or someone who wants multiple locations throughout the country.
Quick-Service Restaurants (QSRs)
Fast-food, or quick-service restaurants (QSRs), continue to thrive – fifty million Americans eat at a fast-food restaurant daily – which makes the industry a great place to invest. QSRs like McDonald’s, KFC, Wendy’s, and Burger King, want total control of their properties for brand recognition, and offer stable, long-term absolute net-lease investments with effortless monthly income, periodic rent increases for 15-20 years, and no maintenance responsibilities.
Many QSR franchisees rely on triple-net (NNN) lease investors to move forward with new locations, which creates a win-win situation for both the property owner and the franchisee. With continued industry growth at around 4% and a recession-proof product, new trends in digital ordering, fast-casual dining, and faster-paced lifestyles, QSRs are a top-rated NNN lease property investment.
O’Reilly Auto Parts Stores
As one of the most successful auto parts retailers in America and an exemplary net-lease investment, O’Reilly Auto Parts, is another of Westwood Net Lease Advisors’ top investment choices for 2020. Since the first store opened in 1957, it has grown to 5,420 locations, with plans to open 180 new stores in 2020. Though the stores are not absolute triple-net (NNN) leased properties, they require very little active management, which makes it viable to own a store in any state no matter where you reside.
You can expect to pay $2-2.5 million for an O’Reilly property and earn a 5.5-6% cap rate. Stores operate under 15 to 20-year leases with five-year renewal options. Given the price point and low maintenance, these properties make a great complement to a current mix of commercial income properties or as a first-time investment.
Dialysis Centers – DaVita & Fresenius Medical Care
DaVita Kidney Care and Fresenius Medical Care clinics are two of the most sought-after investment opportunities in the growing healthcare industry. Both corporations help patients with chronic kidney disease and end-stage renal disease get the treatments they need for better quality of life. Their patients require consistent, routine visits, which produces a reliable income stream and financial stability at each location, and since these centers are built-out to costly medical specifications, there is a high probability that the lease will be renewed beyond the base term.
DaVita, Inc. operates 2,723+ American outpatient centers that treat over 200,000 patients per year. Net-lease investors benefit from a price point that starts at $2 million and a 5-6% cap rate. DaVita offers 10-15 year NN leases with little management and rent increases of 5-10% every five years.
Fresenius Medical Care operates 3,624 clinics worldwide, serving over 306,000 patients with a total of 40 million treatments. NNN investors can expect an average property price that starts at $2 million, a 10-15 year lease with rent escalations, and 5-6% cap rates.
7-Eleven Convenience Stores
7-Eleven is the world’s largest convenience store retailer, with 7800+ company-owned and franchised stores in North America. All location types – walk-up, gas station, and C-stores – are in prime locations, with 25,000 passing vehicles daily, which enhances their value. Gas station stores, corner locations, and shopping center sites vary between modified NNN and absolute triple-net lease terms. 7-Eleven is also offering a non-gas C-store concept – 1000-2500 sq. ft. sites that fit into small retail strip centers, retail condo space, and single-tenant locations – providing investors an opportunity to get smaller spaces in high barrier-to-entry markets.
Sites sell in the $2 to $6 million range with 4.5-6% cap rates. In addition, this tenant operates with a 10 to 20-year lease and 5-10% rent increases every five years, making 7-Eleven a wise investment choice.
Walgreens & CVS Pharmacies
Last, but certainly not least, are Walgreens and CVS – both low-risk, prime net-lease opportunities. It is no secret that these iconic investments gain much of their value from their real estate, as each is nearly always located on a hard-corner with generous 1- to 2-acre parcels for maximum visibility and property value.
Walgreens is the U.S. market leader with over 8,000 retail stores ranging from 10,800 to 15,000 square feet. It is important to note, though Walgreens is reportedly closing 200 less-profitable U.S. stores, they plan to open the same number of stores in new locations. Moreover, to compete with main rival CVS, Walgreens will pay premium rental rates to secure Grade A sites with primary absolute NNN lease terms of 25 years. Investors can expect to pay between $5.5-10 million with cap rates in the 5.25-6.5% range for this highly beneficial, long-term investment.
CVS Pharmacy is the second-largest U.S. retail pharmacy and continues to open new stores. CVS now boasts the same investment-grade credit rating (S&P BBB, Moody’s Baa2) as Walgreens and offers a stable outlook, which improves the value and marketability of its properties. CVS properties average $5-10 million and offer 5-6.5% cap rates. Unlike Walgreens, CVS leases vary depending on location.
A strong economy, stable real estate prices, low interest rates, and long-term, steady cap rates make this one of the best times in history to strengthen your portfolio with NNN properties.
To Wrap It Up – Our 2020 Net-Lease Property Picks
If you’re interested in triple-net lease investing or want to diversify your portfolio, you should look first to the high-credit, quality tenants mentioned above which should preserve cash flow and yield a low-risk, reliable monthly income with little to no owner responsibility.
To learn which property is right for you, reach out to a reputable Westwood Net Lease Advisor who knows the national market and can locate off-market/pre-construction properties for a selection of the most suitable choices to satisfy investment goals. Our team guides you from the property search to closing – all at no charge to you. Contact us today for your free, no-obligation consultation. 314-997-5227
