RESEARCH CAP RATE REPORT Q C ALKAIN.CO M Worldgate Drive Suite 150 Herndon, VA (703)

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1 RESEARCH C A L KA IN R E S E A R CH Worldgate Drive Suite 150 Herndon, VA (703) C ALKAIN.CO M

2 OVERVIEW SECTORS AVG. CAP LOW Q AVG AVG. CAP HIGH LEASE SAMPLE AVG. AVG. RATE YEARS SIZE CAP LOW HIGH LEASE SAMPLE YEARS SIZE (BPS) LEASE YEARS (REM.) Automotive 6.83% 5.85% 8.26% % 5.20% 7.87% Bank % 4.00% 8.00% % 3.80% 9.28% Big-Box 6.20% 3.65% 8.13% % 4.91% 10.70% Casual Dining 5.70% 5.00% 6.75% % 4.50% 7.72% C-Store 6.64% 4.70% 11.67% % 4.05% 12.08% Dollar Store 6.96% 4.75% 10.27% % 5.50% 10.37% Educational % 7.12% 10.00% % 6.60% 14.48% (0.37) Medical 6.76% 6.48% 7.30% % 5.00% 9.00% Pharmacy 5.74% 4.00% 8.21% % 4.81% 7.58% (1.83) QSR 6.00% 3.40% 8.40% % 3.80% 9.76% Other Retail % 5.36% 8.13% % 4.20% 7.52% Average 6.44% % Sample size include an outlier comp of a BB&T STNL which sold for a cap of 9.28% with 3 years remaining. 2 Educational comparable data includes Q sales due to low sample size in Q Other retail includes Walmart Neighborhood Markets, mattress stores, cellular stores, pet stores, fitness stores, and small furniture stores. KEY TAKEAWAYS Transaction volume for was slightly higher than it was for Q Overall cap rates for Single Tenant Net Lease (STNL) properties remained stable for many sectors, particularly for the dollar store and pharmacy sectors. RESEARCH@ 2

3 DOLLAR STORES Average cap rates for dollar stores quarter over quarter remained unchanged. There was also no change in average lease years remaining at sale (10-15 years) which indicates sales were composed mainly of newer stores. Our comp data for dollar stores was composed of Dollar General (63%), Family Dollar (30%), and Dollar Tree (6%) comps. The average cap rates for Dollar General remained steady while both Dollar Tree and Family Dollar had slight upticks in cap rates (92 bps and 56 bps respectively). Investors now seem to be more focused on the real estate and are moving away from tertiary markets. Dollar Store locations with high traffic counts and strong real estate fundamentals tend to trade at or higher than list price with multiple offers. Meanwhile, dollar stores in tertiary locations tend to stay on the market longer with higher cap rates than the stores in primary markets. 7.16% 7.01% 6.58% 7.50% 6.13% 6.69% Q Q Q DOLLAR GENERAL DOLLAR TREE FAMILY DOLLAR 3

4 PHARMACIES Pharmacy cap rates, excluding Rite Aid, remained mostly consistent over the last 6 months. Average remaining lease terms stayed between years indicating that mostly newer stores were trading. Our sample set of pharmacies was composed of Walgreens (69%), CVS (23%) and Rite Aid (8%) comps. The average cap rates for Walgreens was even with the prior quarter. CVS average cap rates were also approximately even with last quarter showing a slight increase of 28 bps while the average cap rates for Rite Aid dropped by 113 bps. The significant drop in Rite Aid s cap rates is due to the pending merger with Walgreens and the associated credit enhancement. 7.76% 5.57% 5.68% 6.45% 5.75% 6.03% Q Q Q WALGREENS RITE AID CVS RESEARCH@ 4

5 8% STNL CAP RATES From a macroeconomic perspective, both STNL cap rates and 10 year treasury rates have remained constant over the last 15 quarters. 7% 6% 5% 4% 3% 2% 1% 0% 3Q12 4Q12 1Q13 2Q13 3Q13 4Q14 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 CALKAIN STNL CAP RATES 10 YEAR TREASURY RATES RESEARCH@ 5

6 RESEARCH DISCLOSURES: As part of our market research, we collect sales price, cap rate, and lease years remaining for all publicly advertised and sold STNL properties.we are not able to capture 100% of the off-market transactions that occur; however the nature of off-market typically limits their value as true market comps. Sources include public records, sales announcements, Calkain sales, and appraiser obtained sales amongst others.our collection process, while thorough, is not all encompassing and there may be biases in the data as it relates to geography, tenancy, or brokers involved in the transaction. Public records often lag behind when transactions actually close, months in some cases. Consequently the data supplied here for any given quarter is likely to miss a material amount of transactions that actually closed in it. Interested in Calkain s Research Services? research@calkain.com CA LKA IN R E S EA R C H Vinky Marolia Research Analyst Worldgate Drive, Suite 150 Herndon, VA (571) calkain.com