Wawa NNN For Sale
Wawa is a privately held company that was originally created in 1803 as an ironworks based in New Jersey. Toward the end of that century, then-owner George Wood became interested in dairy farming and turned Wawa into a cornerstone of the milk delivery market.
But in the early 1960s, the milk delivery business began to decline, and Wood’s grandson opened the first Wawa Food Market. Nowadays, Wawa is a chain of over 800 convenience stores in the mid-Atlantic region and Florida. Locations offer food, beverages, coffee, ATMs, and some offer gasoline too.
Tenant Overview
Wawa’s convenience stores are highly sought-after investment properties on the NNN market these days. Why? It all comes down to the locations.
These triple-net lease properties offer strong real estate fundamentals, and Wawa’s real estate team is fairly particular about site selection. Their metrics focus on key trade area location characteristics. For instance, the company wants locations at signalized corners and outparcel pads of shopping centers.
Good visibility and easy ingress and egress are also must-haves. Wawa’s real estate team values adequately populated areas with minimum traffic counts beginning at 25,000 vehicles per day. Wawa’s sites are typically located at high-volume intersections close to other commercial traffic generators – often commercial areas. All of these factors play into the high desirability of Wawa as an NNN tenant.
| Wawa NNN Lease Overview | |
| Average sale price | $7,200,000 |
| Average NOI (net operating income) | $305,300 monthly |
| Average square feet | 5,000 - 6,000 |
| Average lot size | 1.5 - 2.5 acres |
| Typical lease term | 20 years |
| Escalators | 7% to 10% every 5 years |
| Typical location | Urban and suburban commercial locations with high vehicle traffic |
| Ticker symbol | N/A |
Wawa Lease Structure
In addition to the attractive locations Wawa chooses, it’s also a popular NNN option because of its lease structure. With 20-year primary-term ground leases, Wawa offers investors long-term security and limited management responsibilities.
The average cap rate (also called capitalization rate) for a Wawa net lease is 4.4%. The cap rate is a figure that assesses a real estate investment in terms of profitability and return potential. Typically, cap rates that land between 5% and 10% are considered good. Rates that are slightly lower, like Wawa’s, generally signal a lower-risk investment.
Why Choose a Net Lease Over a Gross Lease When Investing in Commercial Real Estate?
Commercial real estate investors often prefer net leases to gross leases. Why? There are many benefits in play – in fact, these two types of leases are basically the opposite of each oth.
First, a gross lease is one that involves a predetermined amount that a tenant pays to use a space. That value does not change based on operating expenses since landlords generally cover operating costs. On the other hand, net leases allow landlords to hand operating expenses off to their tenants.
There are three tiers of net leases: single, double, and triple (also known as N, NN, and NNN leases). Each level of the net lease allows a landlord to pass more and more expenses onto tenants, absolving themselves of increased risk as the tiers increase.
Single net leases (N leases) pass property taxes to the tenant in addition to the cost of rent, but the landlord is still on the hook for maintenance, insurance, repairs, and utilities. N leases are less common when it comes to commercial real estate. Double net leases (NN leases) and triple net leases (NNN leases) are significantly more common.
What Types of Net Leases Does Wawa Operate Under?
Wawa’s stores typically operate under NNN ground leases, which are attractive to investors due to the additional investment security of a ground lease. Plus, with a lengthy 20-year primary term, investors can expect long-term security and very limited management liabilities.
That’s because NNN leases are normally considered the best type of lease for property owners and investors. Why? It’s simple: They hold the tenant accountable for paying operating expenses and costs related to the property, which can include insurance premiums, property taxes, and structural maintenance or repair costs. In other words, the landlord saves on these variable costs, increasing peace of mind and allowing for a more stable income.
Plus, like any ground lease investment, there is an additional layer of security because Wawa will make a significant investment in the construction of a built-to-suit building, which will become the property of the ground lease owner at the end of the lease.
The company invests capital and manpower by way of Wawa’s engineering and construction department, which is in charge of the design, construction, and engineering of all site remodels and new builds. That is a huge benefit to any NNN investor, as that means the location is much less likely to see lease-breaking or tenant abandonment.
In terms of escalators, Wawa NNN leaseholders can expect to see rent bumps of 7% to 10% every five years – which is excellent, considering that the primary lease term is 20 years. In other words, investors will see three price bumps in the course of just the lease’s initial term.
How to Evaluate a Wawa Net Lease
When you are considering any NNN lease, you have to investigate both property value and tenant strength. This is especially important when you’re reviewing single-tenant properties, like the ones that Wawa prefers. When you hold single-tenant properties, your tenant concentration can be only either 100% or 0%. That is to say that you’ll be generating 100% of your potential cash flow or none of it.
On the plus side, Wawa’s ground leases ensure an additional level of investment from the company – after all, they will have invested a large amount of capital and resources in designing and building the store.
But in order to keep that lease going after the initial term, it’s crucial that you adhere to Wawa’s strict location specifications: high-traffic corners with easy ingress and egress located near commercial corridors. That will help your property stay occupied and generate consistent revenue.
Long-term viability is particularly crucial to consider because of the size and nature of these properties. Because each Wawa store is built-to-suit and fairly large, these locations can be extremely hard to fill should the convenience store move out. With that in mind, it’s important to select a high-traffic location where the store will thrive.
On a more positive note, NNN lease tenants like Wawa are typically large companies with strong balance sheets. That matters because you will be able to count on your payments arriving on time each month, and you won’t waste your time chasing down tenants to get your hands on the rent they owe you
What Makes Wawa an Attractive NNN Tenant?
Wawa is a privately held company, meaning that its detailed financial information is not as readily available as that of companies traded on the NASDAQ or the New York Stock Exchange. Still, there are many promising signs that point to Wawa’s long-term financial viability and continued success.
The company currently ranks at number 24 on Forbes’ list of the largest privately held American companies, and it is actually the largest company overall in Pennsylvania. Plus, its numbers are booming. After recording strong revenue in the fiscal year 2021, at around $11 billion, Wawa grew that number by 36% and reported revenue of $14.93 billion in 2022.
The company makes about $35 million per day in revenue. But most of its profit actually comes from in-store sales rather than fuel. Wawa relies on gas customers making a trip inside to grab a salad, a candy bar, or one of the many other offerings in its aisles. Its revenue numbers are keeping it well ahead of local rival Sheetz, and helps it maintain a strong investment outlook even in comparison to larger competitors like 7-Eleven.
Overall, Wawa is a high-quality tenant that’s an ideal option for NNN ground lease investment. Other NNN Lease Investment Tenants to Consider:
