CVS Health (NYSE: CVS) is a healthcare company that owns CVS Pharmacy, which is not only a retail and drugstore, it's also a real estate company with many CVS properties for sale and lease. And you can invest in it.
If you want to invest in CVS, you have options. You can buy a property for sale, or you can lease a CVS store. CVS has freestanding sites in many locations: downtown urban areas, college towns, and all sorts of neighborhoods. CVS tries to be as convenient to as many people as possible to serve healthcare needs and fill prescriptions. The company's real estate strategy is to open "many more stores to serve a growing number of new communities."
About CVS as real estate investment property
CVS, which stands for Consumer Value Store, is the second-largest retail pharmacy in the United States; Walgreens (NASDAQ: WBA) is the largest. CVS has been in business since 1963; was founded in Lowell, Massachusetts; and is headquartered in Woonsocket, Rhode Island. Its store locations are typically on high-profile corners on one to two acres of land. Most CVS stores are between 10,000 square feet and 16,000 square feet but can be as small as 9,000 square feet and as large as 30,000 square feet.
CVS has acquired many drugstores over the years, beginning with Clinton Drug and Discount Stores and continuing with Mack Drug, People's Drug, stores from Revco, Arbor Drugs, Eckerd, Sav-On, Osco, Longs Drug, Target's (NYSE: TGT) pharmacies, and finally Aetna (an insurance company).
Types of CVS properties for sale
Investors planning to invest in a CVS store should consider their many options, which include:
- Zero cash flow ownership: Here, all the rent payments go to the lender. The landlord would have zero cash flow during the lease term. This is typically for investors who wish to do a 1031 exchange but their property is a high-debt one. The replacement property must also match the high-debt status.
- Fee simple ownership structures: Here, the owner has absolute ownership to use the property as they choose.
- Infill ground lease structures: This is a lease of the land only. This type of ownership separates building ownership from land ownership.
- Leasehold ownership structures: Here, the CVS property has a ground owner, and what's for sale is a leasehold position in the store, giving this investor the right to use the property for a predetermined length of time.
In addition, different types of lease structures are available. Some have zero landlord responsibilities, and some are double net leases that make the landlord responsible for some areas, such as the parking lot, roof, and building structure.
There are differences in the types of CVS facilities as well. Some have a MinuteClinic; some are 24-hour clinics; and some sell liquor, beer, and wine. Finally, the lease terms vary: Some can have more than 15 years remaining, while others have less than five.
The Millionacres bottom line
CVS is most definitely a real estate company. If you're thinking of investing in CVS, consider working with a broker who knows how to invest in drugstores, as there are many variables involved in this type of transaction.