Another Walgreens store building has been sold to an out-of-state investor for $4 million more than its assessed value.
The store, located near downtown Waukesha at 230 Madison St., was sold by Jenkintown, Pennsylvania-based Madison Realty Partners LLC to Exchange Right, a Pasadena, California-based real estate investment firm, for $6.4 million.
The property is assessed by Waukesha County at $2.4 million.
This is at least the fifth Walgreens building in recent months that has sold for well over its assessed value.
The last local Walgreens property sale was in June, on King Drive in Milwaukee’s Harambee neighborhood, which also sold for $4 million over its assessed value. It was purchased by California Pacific Wisconsin Properties LLC of Santa Monica, California, for $6.1 million.
Other Walgreens buildings that have sold for high price tags to out-of-state REITs are in Cudahy, which sold for $4.85 million to a Florida-based firm; on West Capitol Drive in Milwaukee, which sold for $4.2 million to a New York-based firm; and in Wauwatosa, which sold for $8.67 million to a New York-based firm.
There has been a lot of competition in the market for properties where there are strong tenants, such as Walgreens, where the net operating income is high, said John Kuhn, principal with Milwaukee-based The Boerke Co.
“People are hedging their money and investing in real estate versus other opportunities like the stock market, where the returns aren’t as strong,” Kuhn said.
With cap rates at historic lows and interest rates still low, investors are able to purchase these properties at a 4 or 4.5 percent interest rate with a long-term lease tenant and have a positive cash flow, Kuhn said.
“I think we will continue to see these transactions through the end of the year,” he said. “As interest rates continue to rise, that will start to slow the market down.”