Looking at a deal from the debt side. Subject is not a Walgreens owned location. It is my understanding, that non walgreens owned locations are getting killed in terms of cap rates even if they have 10+ year leases. There is a risk premium attached and cap rates are 100-200 points wide. I am seeing 8-8.25% caps in secondary markets which is crazy to me because you have some real shitty NNN properties trading in the high 6's or low 7's. And not many rite aids are also being securitized and if they are done, its at a low leverage. Anybody else seeing the same things? Am I missing something because the market does not seem to like Rite Aids right now.
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I have seen the same on the financing side. In order of best to worst, it would be CVS, Walgreen's, Rite Aid based on several factors.
Look at where there stock has moved over the past 5 years. They're trading at $1 today.
One of our competitors quoted a 70% CMBS loan for this deal. Were at 55% or lower lol. Not sure if our competitor is insane when no Rite Aids have recently been securitized at 70% or if we are uber conservative. This is one of those times where I feel like us trying to not lose money is a much bigger driver than us trying to make money. I can understand that their credit rating has taken hit recently but a part of me also feels that at such low loan amounts, we might be able to get away with it and not get the thorough scrutiny from rating agencies or B buyers that we would normally get for other bigger deals. I'm just venting, but I really felt like we could have quoted at 65-70% for this deal, but I also understand that us being conservative is one of the reasons we are still in the CMBS business when several other shops have exited the business. So, maybe there is a method to this madness.
they may retrade and just want to have the borrowers on the hook
possible, we rarely retrade. Most of our CMBS business comes from brokers, I feel like if we retrade often, the word would spread in the brokerage community very fast. We would rather lose the deal than retrade.
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