There are 3 major drugstore chains in the U.S.: Walgreens, CVS and Rite Aid. The following table lists the companies by market capitalization and turnover in September 2009 that:
Walgreens is # 1 with a market capitalization of 34.26 billion U.S. dollars, $ $ 62.23 in revenue, and notes, S & PA +. According to Walgreens, 75% of the population of the United States within 3 miles away from their shops. On 1 October 2009 Walgreens opened its 7000 ° business in Brooklyn, New York.
CVS is the number 2 with a market capitalization of $ 52$ 93.27 billion U.S. dollars revenue (CVS only if Walgreens is less than the income of their group Caremark is released), and S & P to BBB +. CVS opened its store at 7000 ° Little Canada, Minnesota, 5th October 2009.
Rite Aid is ranked No. 3 with a market capitalization of 1.87 billion U.S. dollars, 26.21 U.S. dollars worth of revenue, 4901 stores and S & P rating of B-.
The purchase of real estate occupied by these chains of pharmacies for the following reasons:
The pharmacy businessRecession sensitive. People need medicine when they are sick, regardless of the state economy. Rich and poor in the United States have access to medicines. Some even argue that the low-income young people take drugs or more drugs for free because of the low cost offered by the funded programs. Thus, the tenant must do even in difficult times and the money to pay rent to the owner.
The activities of the pharmacy has a good chance in the United States
People are living longer and need more support for doctorsLongevity, such as osteoporosis, Actonel, Aricept for the symptoms of Alzheimer's disease. Older people tend to use drugs younger. As 78 million baby boomers reach retirement age in 2008, the drugstore chains anticipate the demand for medicine in the next 20 years continue to grow.
The drug remains the U.S. population increases continue to grow.
There are new drugs for diseases previously incurable diseases and new diseases, such as Viagra to treat maleUnfortunately, Zoloft for depression, to colon cancer, Avastin, Herceptin for breast cancer from nicotine patch for smoking habit, Tamiflu for the potential of pandemic influenza vaccine for swine flu kick (H1N1) pandemic influenza, Tekturna / Rasilez for hypertension and Several new drugs against AIDS, and Attention Deficit Disorder (ADD). The new drugs are very expensive to provide, for example, for a year of Avastin costs about $ 55,000. Eli Lilly has approximately 4.8 billion U.S. dollars in 2007 to sell Zyprexa for schizophrenia and evenMost people have never heard of this drug.
There are drugs that are currently approved for the treatment of new diseases and increase their revenues. For example, Lyrica was originally developed to pain caused by nerve damage in patients with diabetes. It is now approved by the FDA for the treatment of fibromyalgia, which affects 5.8 million Americans out of WebMD.
Major advances in genetics, biology and stem cells are needed to create a new class of drugs to treat diabetes, Parkinson's and produce differentrare genetic diseases. For example, new drug targets from Novartis Ilari genetic causes an inherited disease that there are only 7,000 known cases worldwide. But hopes to expand gradually Novartis, its blockbuster drug for a drug the most common diseases that are caused by genetically similar.
The technology and modern life and the need for new products, such as pregnancy testing, strengthen Lamisil toenails clearer and more import, eyelashes often Latiss, Premarin for menopausal symptoms,diabetic monitors, electronic toothbrushes, contact lenses, lens cleaners, diet pills, vitamins, oral contraceptives, IUDs, dietary supplements and cholesterol-lowering pills (Americans spent almost $ 26B in 2006 on drug for cholesterol only by IMS Health, Connecticut, a consulting firm, the pharmaceutical revenue monitors.) There are also more action: C-parts, triple kidney transplant, open heart over - and breast enlargement. More surgery means more drugsnecessary, as to prevent Vicodin for pain and warfarin on coagulation in the bathroom.
Before customers can access the halls of medicine or pharmacy, you must pass through chocolate, lemonade, digital cameras, watches, toys, dolls, beer and wine, beauty products, video games, flowers, perfume, and greeting cards. They hope that you are hours with the single-photo services and redeem the liquid propane tank. The stores also sell seasonal products, such as lakes such as Halloween costumes and "Ason TV "products, such ShamWow are. As a result, customers who sells more of their needs and medicine at the pharmacy. Rite Aid more than 28,000 items in its non-pharmacy stores, but Walgreens has stores 22,000 different items on the shelves. CVS said that the non-pharmacy sales amounted to 30% of the total turnover of the company in January 2007. The figure for Walgreens is 34% and 37% at Rite Aid. Pharmacy really that many places, convenience stores than the residential sectoror in rural areas. During the recession, sales of these products is to buy because the customer what they need and not what they want. Walgreens attempts to reduce the number of points from 4000 on. Also has his own label, which has a larger profit margin.
There are more and more generics on the market as a number of achievements known brands lose their patent length of 20-years, for example, Lipitor (the world's best-selling drug for lowering cholesterol) in 2010, Actos (forDiabetes) in 2011, Advair (sale of drugs for the treatment of asthma) in 2011), Viagra (you know what that is) in 2012. Pharmacies Generic prefer the customer because of the higher profit margins of branded drug products for sale.
These companies sign very long term NNN leases, guaranteed by the assets of his company. This makes investing in the underlying risk actually relatively low, especially for Walgreens with an A + rating from S & P. In fact, these properties are sometimesInvestment properties of the soil. Once the pharmacy chains sign the lease, they pay the rent quickly and at the right time. This author is not aware of all the properties through a chain of pharmacies, which leases the tenant does not pay rent. Even if the shops) are closed due to weak sales (Walgreens closed 119 stores in 2007, these companies are hiring the features of the other companies in May and continue paying rent for the master lease.
Investment Risks
Although pharmacyCompanies in general, is immune to a recession, there are risks to investing:
The main disadvantage of investing in the pharmacies is that there is little or no dent rent over a longer period, for example, 20-50 years, particularly for pharmacies. Thus, the rent is actually taken after the inflation reduced to This is one of the main reasons for these properties at a younger investor interest.
The 3 pharmacy chains now have a formidable new competitor, Wal-Mart. Wal-Mart sells drugsin over 4,000 Wal-Mart, Sam's Club and Neighborhood Market stores in 49 states. The retail giant is to launch in 2006 a highly publicized program to 4 million for prescription generic drugs known to the now 350 generic drugs sold for a 30-day supply. The actual number of drugs is less than the drugs with different doses are counted as different drugs. For example, metformin, are numbered 500 mg, 850 mg and 1000 mg than 3 medications. Wal-Mart probably makes it unprofitableto these medicines, if necessary. However, the marketing of great publicity for Wal-Mart (Target generates now offers the same drugs for $ 4, but few people know.) Wal-Mart wants to run his business clients with other needs to consider the profit margins higher. In a scientific survey with a name prescription drug Lyrica, the author finds the lowest price at Costco, the highest price at Walgreens and Wal-Mart in the middle.
Chief Business CorrespondentRick Newman of U.S. News & World Report predicted that Rite Aid 2009 could not survive. It seems that could be wrong. Audit Integrity Study Rite Aid has a chance to more than 10.5 percent of bankruptcy in 2010. However, stocks have achieved a good result in the second half of 2009. For the second quarter ending in August 2009 Rite Aid reduced its losses to 116 million euros, compared with a loss of 222 million U.S. dollars last year.
Drugs are also sold in thousands of supermarkets,Target and Costco.
Many leases in areas where hurricanes and tornadoes are NNN leases with the exception of the roof and structure. So, if the roof is damaged, you must pay the costs.
Among the 3 chains of pharmacies, Walgreens and CVS pharmacies usually have the best positions, the most important hubs and Rite Aid has fewer premium seats.
Walgreens: The company was founded in 1901 by Charles Walgreen, Sr. in Chicago. Even if the company has existed for over100 years ago, most stores are only 5-10 years. This is the best way to manage the business between the three pharmacy chains and also among the most admired company public in the United States. The company is led by executives with a proven and the best graduates. With its superior financial strength - S & PA + rating - prime locations and irreplaceable property, with leases from Walgreens get the highest price per square foot and / or capitalization is the lowest among the 3Chains of pharmacies. In addition, Walgreens is flat or very low rent of a rent increase from 20 to 60 years. The market capitalization is often less than 6% to 7.5% from the beach in 2009. Investors who buy Walgreens tend to be more mature, or near retirement age. I'm looking for a safe investment, where it is most important for the control of rents to obtain satisfaction. Often compare the returns on their investments Walgreens with the lowest yield of U.S. Treasury bills or certificates of depositBanks. Walgreens opened many new stores in 2008 and 2009, and a lot of Walgreens, you can find new business for sale. It is the expansion in 2010, slowly and concentrate on the restructuring of existing operations, but
CVS: CVS Corporation was founded in 1963 in Lowell, MA by Stanley Goldstein, Sidney Goldstein, and Ralph Hoagland. The name of the CVS stands for Consumer Value Store. " Since 2009, CVS has about 6,300 stores in the United States, primarily through acquisitions. In 2004, CVS bought Eckerd in 1200Pharmacies primarily in Texas and Florida. In 2006, CVS bought 700 Savon and Osco drugstores, especially in Southern California. In 2008, CVS acquired 521 Longs Drugs stores in California, Hawaii, Nevada and Arizona for 2.9 billion U.S. dollars. The purchase of drugs seems to be a good long time because there are no CVS stores in Northern Canada and Arizona. Furthermore, the price is even real estate. He also bought Caremark, the largest pharmaceutical services companies and changed the company nameCVS Caremark. When CVS Eckerd stockholders in 1200, formed a unity LLC (Limited Liability Company) for each of its Eckerd stores. Each LLC signs the lease with the landlord. In case of default, the landlord can not legally go after the assets of the LLC, and the CV of the other goods. Even if the landlord loses the guarantee of the safety of CVS corporate assets, this author is not aware of any incident where CVS closes a store and not payto rent.
Rite Aid: Rite Aid was founded by Alex Grass (she just disappeared August 27, 2009 at the age of 82 years) and opened its first store in 1962 as "thrife D Discount Center in Scranton, Pennsylvania. It's official as Rite Aid Corporation accepted and published in 1968. When Alex came Grass Company as President and CEO in 1995, Rite Aid the largest pharmacy chain in relation to the total number of stores and was No. 2 in terms of revenue. His son,Martin Grass took over, but it was in 1999, inflation could supplanted Rite Aid end of 1990. Rite Aid is now financially weakest of the 3 chains of pharmacies. In 2007, Rite-Aid about 1,850 Brooks and Eckerd drug stores, purchased mainly along the east coast to meet with CVS and Walgreens to. In this process, has large debts to ) long term (currently owed more than 5.69 billion U.S. dollars and is the first drugstore chain effect on their market value is based. The integration of Brooks Eckerddo not seem to fit. Recipes from some of these shops dropped to 20% by changing the sign of Rite Aid. Since 2009, Rite-Aid has more than 4,900 branches and more than 26 billion U.S. dollars revenue. On January 21, Moody's Investor Services downgraded 2009 Rite Aid to "Caa1" to "Caa2, eight levels below investment grade. Both ratings are" parasites "that give a high credit risk. Rite Aid has a number of its owners in 2009 contacted and attempts to obtain the right to rent the bottom line, improve it.In June 2009, Rite Aid has successfully completed the refinancing of 1.9 billion U.S. dollars of its debt. In September 2009, Rite Aid reported a small loss for the second quarter ending in August 2009.
Things to note when you invest in a pharmacy
If you are in investing in a property leased by drugstore chains are interested, here are some things you should note:
If you follow a low investment risk, with Walgreens. In the areas of stable or growing, the level of security of the sameif the property in California, where a maximum of 6% or Texas, where you can obtain a CAP of 7.5%. So there is no significant advantage for investing in real estate in California, is the value of the property to the cap on prices. In the year 2009 seems offered by the CAP for Walgreens to increase about 1% compared to previous years. So you might be able to get some recognition for your investment if you are selling at a lower rate of CAP in the future.
When you are ready to take overRisk, and then go to Rite-Aid. Some properties outside of California offers up to 10.75%% wholesale rate in 2009. However, among the 3 drug chain Rite Aid has 10.5% chance to fall in 2010. We need to file for bankruptcy, Rite Aid has the ability, the situation for open space and to choose to terminate the lease. To minimize the risk that minimize the memory components, select a location with strong sales and low rent to sales ratio.
Unless you are a conservative investor, ortake risks, you can check a CVS pharmacy. He BBB + S & P. Their Credit market capitalization greater than Walgreens, but less than Rite Aid. Some contracts may require hiring more shock. Secondly, some CVS leases, particularly for properties in hurricane areas, for example, Florida has not really NNN lease in which the owners are responsible for roof and structure. To make sure to adjust the capitalization rate on this basis. Some places have staff on site CV minutes Clinic registeredNurses. Since this idea was recently introduced clinical, it is unclear who in a clinic in a CVS, the store is pretty much the bottom line.
All 3 chains of pharmacies have similar requirements. They all want highly visible, standalone, rectangular property around 10,000 to 14,500 SF on a 1.5 - Lot 2 acres, preferably in a corner, with about 75-80 cars in a growing and high-traffic location. All of this requires the property, a drive-thru. Therefore it shouldAvoid buying a property on-line, ie non-self, and property without drive-thru windows. It is possible that these drugs should not, the lease if the property is located in an extension of a densely populated and the lack of open spaces nearby. Even if you have a property that is not the new requirements, like a drive-through purchase, you may have a problem of financing as lenders are aware of these requirements ago.
If the pharmacy24 hours a day, is in a better place. Drugstore chains do not open the store 24 hours a day, if the location attracts customers.
Many properties can have a lease payment, or the owner may have received additional pension, if the Bank's annual revenues more than a certain number, say, 5 million U.S. dollars. But the Revenue to calculate the percentage rent often includes a page long list of items, such as wine and soft drinks, tobacco products, items sold in 10-hour paid for drugs by the government programs, etc.excluding sales could be up to 70% of the gross receipts of the store. Therefore, this author has only 1 transaction in which the owner is able to view additional content to collect rent. The business of renting and vote is required to report their monthly sales to the owner. As an investor, you should invest in a business with high gross sales, for example, more than $ 500 per square meter per year. You also want to check the rent revenue ratio. If the number in the range of 2-4%,The store is likely to be very profitable if happiness is, is the store is closed low.
No matter what the tenants are good, not in the reduction and / or low-income areas or smaller cities with fewer than 30,000 residents to invest less than 5 miles from the ring. May be in a small town, the only pharmacy in the city and includes a large share of the market. However, if a competitor opened a new branch in the region are also strongly affected the yields. These properties are easy to buy and sell hard tolater. In 2009, when the credit-constrained market, you may have difficulty finding a lender to finance these properties.
Many properties have an existing loan, the buyer must take. If you have an exchange of 1031, you think twice before buying the property. You must understand the requirements of the lenders loan assumptions before we act. If you are not in a position to assume the existing loan (assuming the existing mortgage is more difficult to get a new loan), you can drainTime for an exchange of May 1031 and is responsible for capital gain.
With few exceptions, the pharmacy chains are not the owners of shops, which for several reasons. Here are just a few:
They know that the business of pharmacy do not know, but real estate. Equity investors do not want Walgreens to a REIT.
Landlord requires a lot of long-term debt that is not a good idea for a publicly traded company.
About 10% ofPharmacy properties for sale and CVS pharmacies usually require very small amounts of capital for the acquisition, for example, 10% of the purchase price. However, you are obliged to assume an existing fully amortized loan with zero cash flow. In other words, the total rent paid by tenants will be used to repay the loan. The capitalization rate may range from 7% and the interest rate on the loan could be interesting from the point of 5.5% to 6%. Therefore, the investor pays the loan in 10 to 20 years. However,Investors no positive cash flow. This requires finding the funds to pay taxes on the rental profits (the difference between rents and mortgage interest). The longer you own the property, the more money you pay the fees that the mortgage rate less and less to the end. Who should buy this type of property?
Investors who have a significant loss of other assets or the stock market. By acquiring this zeroCash flows of the property, then the tenant may offset the pharmacy of income before the loss of other assets or the stock market. For example, rent a property and $ 105,000 profit per year, and the investor also has rental losses of U.S. $ 100,000 from other properties. Consequently, the combination is profits are only $ 5,000.
Sophisticated investors who do not know they have to raise additional funds to pay taxes on income.
Thinking Out of the Box
If yougive too much weight on the S & P rating of the tenant, or you may end up here a lot of risks or missed a good chance.
Good location should be the key to determining which of Pharmacy in. There is often an ugly business would be a great place, and the tenant will invest in a better place to not be unhappy. A Walgreens store is closed, according to (yes, Walgreens, 119 stores closed in 2007) is still a bad investment, even if Walgreens continue to be paidRent on time. To not invest blindly in a pharmacy, just because it is a Walgreens.
No company is crazy enough to close a profitable website. It does not take a genius to understand that a financially weak companies will, as Rite Aid everything possible to maintain an open dialogue profitable businesses. On the other side is a solid financial plan, Walgreens, maintaining an open space does not justify viable. How can you tell if a site is viable or drug storeif the tenant is not obligated to disclose profits and losses? The answer is that we can not. However, you can enjoy a presumption on the basis of annual gross receipts do, is often referred to as the shop owner, as it assessed the clause in the lease. Gross income, you can determine the rent compared to income. The lower the ratio, the more likely that the business is profitable. For example, if the basic annual subscription is € 250,000, while the gross revenue of the store $ 5 million, then the rentIncome ratio is 5%. In general, it is difficult to make a profit if the ratio is greater than 8%. If you're a Rite Aid, with a rent of 3% compared to the income, then you know it's probably much less expensive. If Rite Aid declared bankrupt, this place is open and will continue to pay the rent. If you see a Rite Aid pharmacy, with a rent of 3% compared to income of 11% of the CAP, it is probably a low risk investment with good returns. The weakness of the security company Rite Aid isHave probably not so critical and can Rite Aid as a tenant, is not really important.
