Colliers Negotiates Rare Reverse Exchange Transaction in $42.25MM Purchase of Flagship Honolulu Walgreens, Sets New Benchmarks for Overall Price, Cap Rates for Korean Buyer

Walgreens, Honolulu, San Francisco, Bay Area, Colliers International

Walgreens, Honolulu, San Francisco, Bay Area, Colliers International

Lagos-Led Team Guides Investment Firm through Bid Process by Using Aggressive, Winning Tactics

HONOLULU – August 3, 2017 – In what is among one of the largest single-tenant, net-leased pharmacy transactions on record in the U.S., a selling entity affiliated with both Los Angeles-based Salem Partners and Wayne, Pennsylvania-based Argosy Real Estate Partners, sold Walgreens flagship store in Honolulu for $42.25 million and, in the process, process, established new benchmarks for overall sales price, price per-square-foot and capitalization rates, Colliers International has reported. The Honolulu store, located directly across from the Ala Moana Center, the largest open-air shopping complex in the world, sold for a 4.73% cap rate.

A Colliers team led by Los Angeles-based Executive Vice President Tom Lagos, spearheaded negotiations on behalf of the buyer, a Korean investment fund also based in Los Angeles. The Salem Partners/Argosy-affiliated entity had purchased the approximately 37,000-square-foot property from Walgreens in November 2015 as part of sale-leaseback transaction. As part of the original purchase transaction, the Salem Partners/Argosy-affiliated entity also acquired the adjacent parking structure and office building and currently is pursuing entitlements to develop two new high-rise, mixed-use towers.

Utilizing the Lagos team’s proprietary 1031 Exchange Navigator™ program, which is led by Colliers International Associate Michael Asarch, the purchase of the Walgreens property was set to be the up-leg part a 1031 Exchange transaction involving the sale of a $26 million grocery-anchored shopping center known as Hacienda Plaza, the down-leg property, located in California.

However, the Hacienda Plaza sale was delayed during the closing process imperiling the exchange transaction. But the Korean investment group was reluctant to pass on the opportunity to purchase the two-level, strikingly designed, and glass-enclosed Walgreens location, winner of several national and international architectural competitions, including a prestigious VIVA Award in 2016 in the Retail Store category from the International Council of Shopping Centers (ICSC).

In a move that further demonstrated Lagos’s experience, he counseled his client and then directed his team to arrange a very rare Reverse 1031 Exchange that required the Korean group to “park” its property with an Exchange Accommodation Titleholder (EAT), which will allow it to complete the exchange transaction with Hacienda Plaza after the purchase of the Walgreens site.

“We had a very small window of time for bid preparation and submittal, a process that had been underway and was nearly closed by the time Asarch sourced the opportunity,” said Lagos. “The seller required a firm promise from us to close in 30 days or less and was doubtful we could perform on such short notice, but we prevailed.”

Keys to the success of the Lagos team were its overall experience in retail investing and a strong commitment to their client’s 1031 Exchange requirements, as well as its background in transacting business in Hawaii. In addition to the near-record cap rate for a Walgreens location, this transaction was made all the more valuable because it was a fee-simple sale with an existing long-term lease in place with scheduled rent escalations, something rarely seen in the sales of single-tenant Walgreens locations, according to Lagos.

“Despite the very tight deadline, the timing was right for both the buyer and the seller,” Lagos added. “The credit strength of the buyer was obvious and the size of the deal has now made a statement to the retail investment community that our Korean client is a major player and looking to add more core product to its portfolio of properties in the U.S.”

About Colliers International
Colliers International Group Inc. (NASDAQ and TSX: CIGI) is an industry leading global real estate services company with more than 15,000 skilled professionals operating in 68 countries. With an enterprising culture and significant employee ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting. Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice that help clients accelerate their success. Colliers has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals’ Global Outsourcing for 12 consecutive years, more than any other real estate services firm. For the latest news from Colliers, visit Colliers.com or follow us on Twitter (@Colliers) and LinkedIn.

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