Walgreens’ 120-year commitment to convenience, quality, and growth, its financial strength, and the company’s essential, virtually recession-proof health and daily living stores, combined with its prime real estate and triple-net (NNN) lease investment opportunities make Walgreens Westwood Net Lease Advisors’ NNN Tenant of the Quarter.
As of 2020, approximately 78% of the US population lives within five miles of a Walgreens or Duane Reade retail pharmacy.
Who is Walgreens?
In 1901, Charles R. Walgreen purchased the Chicago pharmacy where he had been a pharmacist. By 1913, he had four more locations in Chicago, and in 1927, opened his first East Coast store in New York. That year, the company also went public on the New York Stock Exchange. By year-end 1929, there were 397 Walgreens stores in 87 cities; annual sales were $47 million with net earnings of $4 million. By 1953, Walgreens was the largest self-service retailer in the USA. Now it operates 9,021 Walgreens and Duane Reade retail stores, with annual US sales in 2020 of $107.7 billion.
In FY 2020, Walgreens served 8 million customers in its stores and online each day and, on a 30-day adjusted basis, filled 287.6 million prescriptions. The company employs 225,000 people and has over 85,000 healthcare service providers – pharmacists, pharmacy technicians, nurse practitioners, and other health-related professionals.
Walgreens continues to innovate to provide a convenient omnichannel experience for its customers, including the addition of hundreds of in-store, walk-in medical clinics (VillageMD) in 30 markets by July 2021, as well as potential dental clinics (an Aspen Dental trial is already in some Florida stores). The company has also revamped its mobile application and extended drive-thru services to include retail products and curbside collection for online orders.
“WBA is included in FORTUNE’s 2020 list of the World’s Most Admired Companies. This is the 27th consecutive year that WBA or its predecessor company, Walgreen Co., has been named to the list.” –WBA 2021 Earnings Report
Walgreens Financials: Continued Growth & Positive FY 2021 Reports
In 2020, WBA reported earnings of $456 million and annual revenue of $139.5 billion. The first six months of FY 2021 earnings exceeded expectations, “despite less foot traffic, lower sales of cough, cold and flu medications, and fewer new prescriptions as people skipped the doctor’s office and socially distanced during the Covid pandemic,” said Chief Financial Officer James Kehoe.
Information from the 2021 FYQ2 Earnings Report shows six-month sales from continuing operations of $64.2 billion, an increase of 4.8 percent from the same period a year ago. The US segment had second-quarter sales of $27.3 billion, an increase of 0.4 percent from the year-ago quarter. Pharmacy sales, which accounted for 74.9 percent of the segment’s sales in the quarter, increased 3.0 percent compared with the year-ago quarter. (Full FYQ2 report).
On the earnings call, Kehoe said, “Walgreens remains focused on long-term opportunities rather than short-term, pandemic-related challenges.” Projections for continued growth, though somewhat still at the mercy of the COVID pandemic, are positive as Walgreens takes measures to grow how and where consumers’ needs are greatest.
Why Walgreens is a Top NNN Lease Investment Opportunity
Because Walgreens is “focused on creating a neighborhood health destination and a more modern pharmacy aligned to a wider range of healthcare services,” it continues to have strong financials even in the face of a pandemic and uncertain economy. Coupled with the list of NNN investor benefits, Walgreens gets our vote as one of the best NNN lease investments in the market.
- This iconic investment gains much of its value from the real estate – typically 14,000 sq. ft. buildings on 1.5-acre hard-corner parcels with maximum visibility and property value.
- Walgreens pays premium rental rates to secure Grade A sites with primary absolute NNN lease terms with extensions.
- Strategic placement in prime locations near other businesses and retail staples, most often on the commuting side of traffic patterns, also boosts investment and resale value.
- Stores operate with a corporate-guaranteed, 10- to 20-year lease (20 years on new leases) from an investment-grade, Baa2-rated tenant.
- The 5.00–6.00% cap rates typically hold steady for the lease term.
Single-tenant Walgreens’ properties sell in the range of $4-7M, and are free of landlord responsibility, which makes it viable to own one in any state without worry, no matter where you live.
As of May 16, 2021, the top states with the most Walgreens locations are Florida, 823; Texas, 704; California, 584. It is no coincidence that these are also the top three states for NNN property investing.
To Wrap it Up – Walgreens Boots Alliance NNN Tenant of the Quarter
Investment-grade Walgreens Boots Alliance, Westwood’s NNN Tenant of the Quarter, is shaping the pharmacy-led health and daily living market with omnichannel distribution and product and service convenience that goes beyond just drugstore offerings. As Walgreens continues to look for growth opportunities and expand, its stores remain prime NNN investments offering reliable, worry-free monthly income and annual tax opportunities that preserve capital for up to 20 years.
Don’t Miss a Walgreens NNN Opportunity – They Sell Fast
If you’re interested in learning more about purchasing a Walgreens NNN lease property or would like to utilize a 1031 exchange to trade out of a high-maintenance property for a no-maintenance NNN investment, connect with a Westwood Buyer’s Advisor today.
We are here to educate, advocate, represent, and guide you in every step of the process – from the pre-property search through closing – all at no charge to you. Walgreens’ properties sell fast, so be sure to reach out for your no-obligation, free consultation, 314-997-5227.
