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CVS/Walgreens Portfolio

10 (6 CVS, 4 Walgreen’s)
  • Property Type: Retail
  • Size: 117,074 Sq. Ft.

Challenges

• The owner needed to sell due to tax implications created by the phantom income and the zero cash flow structure of the deal
• After a contemplated sale of the CVS stores the seller would have need to find debt for a new acquisition with approximately 90% leverage
• In order to sell the CVS stores and defer tax liability, via a 1031 Starker Exchange, the seller needed additional equity
• There were different ownership entities and different ownership structures including: LLC, S-Corporation, C-Corporation
• An additional challenge was presented

Solutions

• Quantum was able to understand the tax implications of the disposition and understand that the capital markets were not going to lend the client 90% debt on a new acquisition
• In order to have the proper debt structure, Quantum was retained to sell an additional property, a Walgreen’s store
• Quantum was able to utilize our lending relationships and hence, created a more manageable debt structure
• By understanding our client’s multiple ownership structures, tax implications, capital market needs and timing challenges, Quantum exclusively engaged to market the properties for sale and we exclusively represented our client in his acquisitions

Results

• Within two weeks of marketing this portfolio the team at Quantum was able to generate multiple offers for both the zero cash flow properties and single-tenant Walgreen’s
• Quantum negotiated with the purchasers of both the CVS stores and the Walgreen’s favorable terms allowing our client time to find assets that would meet his timing and leverage requirements
• Quantum was able to utilize our database and national relationships to find our client both off-market and on-market properties that fit his acquisition criteria
• By understanding the nuances of this deal, Quantum was able to work with our client so he could benefit from negligible tax implications

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