Cleveland Park CVS Property Sells Below Asking Price For $15M

A retail property in Northwest D.C. sold below its asking price, showing potential investor concerns about the economy. 

Calkain's Jonathan Hipp and Rick Fernandez announced Tuesday they represented the seller in the $15M sale of the CVS property at 3323 Connecticut Ave. NW.

The brokers didn't disclose the seller or buyer, but property records show Lucy Galich Marital Trust Properties LLC sold it last month to an entity managed by McLean-based Dr. Ambrish Gupta. 

The 8,754 SF property, sitting two blocks from the Cleveland Park Metro station, is fully leased to CVS through 2028. The retailer's deal is a triple-net lease, meaning the tenant pays all operating costs, and it includes annual 3% rent increases. 

The sale of the property pencils to $1,714/SF with a 5.8% cap rate. The Calkain team brought the property to market in December seeking a $17.5M price tag, which would have translated to a 5% cap rate. 

"That was an an aggressive number out front ... and the market just did not have an appetite to pay that," Fernandez tells Bisnow. "The buyer negotiated a strong deal, and the seller was a family trust that was motivated to sell the property."

Fernandez said the market's lack of appetite for the initial asking price shows that there is a level of concern among investors in the net lease retail market about where the economy is heading. 

"There's a lot of uncertainty in the market," Fernandez said. "If you look at the inverted yield curve that's garnered so much attention, I think that accurately reflects where the net lease investor is today. They're confident in the short term about the economy, but long-term, I think there's uncertainty about what's going to happen. That has made buyers motivated to get deals done, but cautious."