CVS and Walgreens built nearly identical real estate: freestanding corner pharmacies on 20-to-25-year corporate leases. Yet in 2026 they sit on opposite sides of the single most important line in net lease, the BBB‑/Baa3 threshold that separates investment grade credit from everything below it. CVS remains a rated, public, investment grade tenant. Walgreens went private in August 2025 under Sycamore Partners, its ratings were withdrawn after sitting at BB‑/Ba3, and its stores now trade hundreds of basis points wider than comparable CVS assets. Our investment grade guide explains why that threshold moves pricing; no tenant pair demonstrates it more vividly than this one.
Quick verdict: CVS (BBB/Baa3, roughly 6.44% average cap rate) is the only investment grade choice in the pharmacy sector. Walgreens (unrated, formerly BB‑/Ba3, 8.6%–9.5% cap rates) offers dramatically higher yield that compensates for private equity ownership, 1,200 announced store closures, and analyst-flagged bankruptcy risk. This is not a comparison of two similar credits; it is a live illustration of what crossing the investment grade line costs, roughly 220–300 basis points.
CVS vs Walgreens: Side-by-Side Comparison
| Metric | CVS | Walgreens |
|---|---|---|
| S&P Rating | BBB (Stable) | NR; BB‑ before privatization |
| Moody’s Rating | Baa3 (Stable) | NR; Ba3 before privatization |
| Investment Grade Status | Investment Grade | Non-Investment Grade / Unrated |
| Ownership | Public (NYSE: CVS) | Private (Sycamore Partners, Aug 2025) |
| US Store Count | 9,135 (all corporate-owned) | ~7,500 (1,200 closures announced) |
| Cap Rate Range (2026) | ~6.44% average; 5.92% for 10+ yr term | 8.6%–9.5% |
| Typical Primary Lease Term | 20–25 years | 25 years |
| Escalations | ~5% every 5 years typical | Often flat primary term |
| Guarantee | Corporate (CVS Health) | Corporate (post-LBO entity) |
| Typical Price Point | ~$5.5M median | $2.5M–$6.0M |
| Annual Revenue | $370B+ (FY2024) | $147B (FY2024, last public) |
Cap rate data reflects 2026 market conditions. Walgreens figures reflect post-privatization trading; individual assets vary widely with remaining term and closure-list exposure.
Credit Rating Comparison: A Threshold Case Study
CVS Health carries BBB from S&P with a Stable outlook, Baa3 from Moody’s with a Stable outlook, and BBB from Fitch with a Negative outlook. The Moody’s Baa3 sits at the final investment grade notch, so CVS is not a fortress credit; leverage from the Aetna acquisition still weighs on the profile. But CVS remains a rated, public, investment grade company with $370B+ in revenue, diversified across retail pharmacy, insurance (Aetna), and pharmacy benefits (Caremark), and every one of its 9,135 US pharmacies is corporate-owned with a CVS Health guarantee behind the lease.
Walgreens no longer has ratings at all. Before Sycamore Partners completed its $10B take-private in August 2025, Walgreens had already fallen to BB‑/Ba3, three notches below the threshold. Post-privatization, the rating agencies withdrew coverage, the company was split into five business entities, and a 1,200-store closure program is underway. For a landlord, that means underwriting a leveraged, private, unrated obligor with no public financial transparency for the remaining decades of a 25-year lease. Both tenants’ positions on the ratings scale can be tracked on our credit tenant ratings index.
Cap Rate Comparison: What 220–300 Basis Points Is Pricing
CVS assets average roughly 6.44% in 2026, with long-term (10+ year) leases pricing near 5.92% and HealthHUB conversions in major metros clearing sub-6%. Walgreens assets trade between 8.6% and 9.5%. That spread of roughly 220–300 basis points over CVS is the market’s price for the difference between an investment grade guarantee and a post-LBO, unrated one.
The Walgreens range itself is unusually wide because asset-level outcomes diverge sharply: a strong-corner Walgreens with 15+ years of term and healthy store volumes is a very different asset from one plausibly on the closure list. Buyers should demand store-level sales, review the closure program’s progress, and price residual reuse value as if the lease might not run its full term. Full tenant detail: CVS credit rating & NNN cap rate and Walgreens credit rating & NNN cap rate.
Lease Structure: Term, Escalations, and Guarantee
Both tenants sign long corporate-guaranteed leases with no franchisee risk, historically the sector’s biggest draw. CVS leases typically run 20–25 years with rent bumps around 5% every five years plus multiple five-year options. Walgreens leases run 25 years, often flat through the primary term, a structure investors accepted for decades because the credit seemed unassailable.
The guarantee is where the two have diverged. A CVS lease is guaranteed by a public, rated, investment grade company. A Walgreens lease is guaranteed by a privately held, post-buyout entity whose financials are no longer public and whose restructuring divided the business into five units. Long lease terms protect landlords only as far as the guarantor’s solvency; that is why identical lease paper now prices 220–300 basis points apart.
Store Footprint and Closure Risk
CVS operates 9,135 US pharmacy locations, all corporate-owned, and completed its own 900-store consolidation in 2025, closures that were announced, executed, and finished. The company continues converting locations to HealthHUB formats and pairing pharmacies with clinic services, deepening each site’s role in its healthcare strategy.
Walgreens operates roughly 7,500 US locations and is in the middle of closing 1,200 stores over three years, about 12–13% of its base. For landlords, closure risk is the dominant underwriting variable: rent may continue on a dark store, but a dark pharmacy erodes residual value and re-leasing prospects. Former Rite Aid stores flooding several markets after that chain’s liquidation add re-leasing competition in exactly the corridors where Walgreens closures concentrate. Our pharmacy NNN sector guide covers reuse value in depth.
Bond Yields vs NNN Cap Rates: The Pivot
CVS remains an active investment grade bond issuer, and its bonds give NNN buyers a live benchmark: CVS intermediate bonds have recently yielded in the mid-5% area against a 6.44% average cap rate, a premium of roughly 100–150 basis points for owning the real estate, plus depreciation, 1031 exchange eligibility, and residual land value that bondholders never receive. The full comparison is here: CVS bonds vs NNN.
Walgreens no longer offers that comparison. With ratings withdrawn and the company private, there is no liquid public credit benchmark for its lease obligations, itself a warning: the bond market’s pricing discipline has gone dark on this credit precisely when landlords need it most. Investors who want to understand how bond pricing frames NNN value across the rated universe can start with our investment grade bonds hub.
Which Tenant Fits Which Buyer?
Choose CVS if you want the only investment grade pharmacy credit, predictable 5% escalations, and an asset that lenders will finance on standard terms. CVS is the appropriate pharmacy allocation for 1031 exchange buyers, retirement-driven investors, and anyone underwriting the lease as a long-duration income instrument.
Choose Walgreens only if you are a yield-driven buyer who prices credit risk professionally: store-level sales verified, closure list checked, residual value underwritten as the primary protection, and the 8.6%–9.5% cap rate treated as compensation for genuine risk rather than a bargain. Walgreens today is a high-yield real estate trade, not a passive credit investment.
Talk to a buyer’s broker before you commit. Pharmacy net lease pricing is diverging asset by asset, and closure-list exposure is not visible in listing brochures. We track live comps and store-level intelligence on both tenants. Request a buyer consultation and tell us your risk tolerance, target yield, and market.
Frequently Asked Questions
Is CVS or Walgreens a better NNN investment?
CVS is the stronger credit by a wide margin: BBB/Baa3 investment grade ratings versus Walgreens’ withdrawn ratings (BB‑/Ba3 before its 2025 privatization). CVS trades around 6.44% while Walgreens trades at 8.6%–9.5%; the spread compensates for private equity ownership, announced store closures, and the absence of public financial transparency. Risk-averse and 1031 buyers should favor CVS; Walgreens suits only professional risk pricing.
What is the Walgreens credit rating after privatization?
Walgreens no longer carries public credit ratings. Before Sycamore Partners took the company private in August 2025, it was rated BB‑ by S&P and Ba3 by Moody’s, both non-investment grade. Ratings were withdrawn after the buyout, so landlords now underwrite an unrated, privately held obligor.
What cap rates do CVS and Walgreens NNN properties trade at?
In 2026, CVS assets average roughly 6.44%, with 10+ year lease terms near 5.92%. Walgreens assets trade between 8.6% and 9.5% depending on remaining term, store performance, and closure-list exposure. The 220–300 basis point spread reflects the credit gap between the two tenants.
Are Walgreens NNN properties safe with a 25-year lease?
The lease term only protects landlords as far as the guarantor stays solvent. Walgreens is closing 1,200 stores, carries substantial buyout leverage, and analysts have flagged bankruptcy risk. Buyers should verify store-level sales, confirm the location is not closure-exposed, and underwrite residual reuse value rather than relying on the lease term alone.
Which pharmacy tenant works for a 1031 exchange?
CVS, for most exchange buyers. It combines investment grade credit with standard financing availability and roughly $5.5M median pricing. A 1031 exchange locks capital into the asset for years, which argues against unrated credits with active closure programs unless the buyer is deliberately pricing distressed yield.
