Michaels Credit Rating & NNN Cap Rate

Michaels Business Overview & NNN Investment Profile

The Michaels Companies is the largest arts and crafts specialty retailer in North America, operating approximately 1,150 Michaels stores and Aaron Brothers framing locations across the United States and Canada. Apollo Global Management took Michaels private in March 2021 in a leveraged buyout valued at approximately $5.0 billion, delisting the company from the NASDAQ. Despite the take-private, Michaels continues to carry public debt — making its credit ratings, issued by S&P and Moody’s on the outstanding bond obligations, publicly available to NNN investors.

Michaels Credit Rating Analysis

Michaels’ B/B1 ratings reflect the LBO debt burden from Apollo’s 2021 acquisition combined with the competitive and secular challenges facing the arts and crafts specialty retail category. The positive credit factors are Michaels’ dominant market position — it is the only national chain in the arts and crafts segment after Jo-Ann’s liquidation — its large and loyal core customer base of crafters and DIY enthusiasts, and its custom framing business which provides higher-margin, service-based revenue that online competitors cannot easily replicate.

Joann’s liquidation in 2025 is actually a meaningful competitive positive for Michaels, eliminating its closest national competitor and freeing up customer spending that had been split between the two chains. This competitive tailwind may support improved sales trends and cash flow in 2025 and 2026, though it remains to be seen whether Michaels can capitalize on the opportunity given its own debt constraints. Non-investment grade B/B1 ratings indicate speculative credit quality requiring thorough due diligence.

Michaels NNN Lease Structure

Michaels NNN leases typically carry 10 to 15 year initial terms in strip and power center locations of 15,000 to 20,000 square feet. The mid-sized format is highly re-tenantable — similar to the Jo-Ann format that absorbs a wide range of specialty retail, fitness, healthcare, beauty, and food and beverage replacement concepts. Rent escalations of 5% to 10% every five years are standard. The accessible price point of $3,000,000 to $7,000,000 makes Michaels NNN properties available to individual investors alongside institutional buyers.

Michaels NNN Cap Rate & Pricing Trends

Michaels NNN properties trade at cap rates between 7.5% and 9.0% as of Q1 2026. The B/B1 rating and LBO leverage profile command wide spreads relative to investment-grade specialty retail. Power center locations with strong demographics, long remaining lease terms, and productive stores price at the tighter end. Locations with shorter remaining terms or weaker trade areas price at wider spreads to compensate for rollover risk.

Michaels NNN Investment: Pros & Cons

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