Net Lease Advisor Tenant CVS


  • Investment grade tenant
  • Corner locations provide access and visibility
  • Generally over 1.0 + acre of land
  • Corporate leases qualify for CTL Financing


  • Some NN leases
  • Flat rent over primary term
  • High rental rates would prove difficult to replace

Earnings Highlights

Fiscal Year 2017 Summary
  • Net revenues increased 4.1% to $184.8 Billion
  • GAAP diluted EPS from continuing operations of $6.45
  • Adjusted EPS of $5.90, excluding $1.5 Billion income tax benefit resulting from tax reform
  • Generated cash flow from operations of $8.0 Billion; free cash flow of $6.4 Billion

Tenant Description

CVS Pharmacy is currently the second largest retail pharmacy in the US, behind Walgreens.

CVS continues to deliver new net lease properties to the market. CVS has annual retail sales per square foot totaling more than $840, compared to the sector average of $680 for its publicly traded peers. CVS also now boasts a higher credit rating than Walgreens (historically CVS had a lower credit rating than Walgreens) and is considered investment grade with a stable outlook, which improves the value and marketability of corporate guaranteed net lease properties.

Traditionally, CVS leases featured a flat rental structure, however, recently prime locations have been able to demand rental bumps during options - making these properties highly sought after by the net lease investor. The attraction to the investor is likely due to the stability and profitability of the Pharmacy segment as well as the investment grade credit of CVS. The real estate also plays an important driver in these assets, as they are almost exclusively hard corner locations with premiere visibility, and generous access on 1.00 - 2.00 acres of land.

Over the past decade, CVS has signed a variety of lease types. Originally, CVS stores operated under NN leases, holding the landlord responsible for the roof and structure of the building, and in some cases parking and landscaping. These NN leases might provide rental increases as often as every 5 years. However, new leases typically contain flat rents over the primary term, (some prime locations can demand rental bumps) and can vary from ground leases to NN fee simple transactions.

CVS Health Corporation is a publicly traded company on the New York Stock Exchange and has been in business for more than 50 years with the start of first store in Lowell, Massachusetts.

CVS Health Corporation includes CVS Pharmacy which approximately has 9,700 retail pharmacies, CVS MinuteClinic with more than 1,100 walk-in health care clinics, CVS Caremark, a leading pharmacy benefits manager with more than 90 million plan members, and CVS Specialty, a dedicated senior pharmacy care business serving more than one million patients per year, and expanding specialty pharmacy services.

Average Cap Rate
12 mo avg with 10+ yr lease term
Average Property & Lease
Average Sale Price $5,005,345
NOI $282,802
$/Square Foot $400 - $500
Building SF 10,000 - 13,000
Lot Size 1.00 - 2.00 Acres
Lease Term 25 Years
Escalations Varies
Stock Symbol CVS
Credit Rating
Moody's Baa1
Average Cap Rate Trend
Rates reflect last 12 mos, short and long-term
Recent Sales Comps
Harrisburg, NC 5.07%
Chicago, IL 6.50%
Tujunga, CA 4.82%