Walgreens purchase of Rite Aid locations

3 Replies

Is there any way to find out which Rite Aid locations are being sold to Walgreens? If I recall correctly, Walgreens is supposed to be closing up to 600 stores. Is that information somewhere?

As a follow up is Walgreens still obligated to pay rent for the remainder of the lease even if they close the store?

I don’t think it has been announced yet, but it will probably go in phases. They are likely to close RADs within a mile of Walgreens, especially if poor performing or poorly located. There are plenty of RADs that are part of strip malls or not on signalized intersections that are hold overs from previous acquisitions (Eckerd for example). Only the RE folks at the two companies will know definitively which stores are performing well...brokers probably have an idea if they work in stnl regularly. I would assume wba will pay the remainder of the closed store leases, but the lease owner may have a challenge in refitting or selling the building if a gold standard tenant (wba) has pulled out because the location or specific market is poor. If you own one of the transition stores, your value went up overnight, but renegotiating options or a new lease will be more difficult w wba.

@Colby Carrier gave some really good information. As far as paying rent, yes. They do HAVE to continue paying, though they don't always. But especially when they have a parent company guaranty, they do often follow through with their obligation, or try to negotiate a buyout. 

There are commercial lenders who loan on dark buildings,etc. They generally want to see a plan from the landlord/owner of how they will put another tenant in and what the new value and lease terms are estimated at.

The early termination you would want to be substantial from the past tenant if they are a strong corporate guarantee. You want to try and cover as much leasing commissions,TI, and your legal costs as possible with the termination fee.

Example a Walgreens with 3 years left primary and dark the question is (what rent are they paying? Is it above market,at, or below market?

It does not matter if you are buying a 12 cap today if paying 30 a foot because the Dollar Store that goes in will likely paying  15 a foot. So you have to underwrite what you can put in today and at what rate. You will sometimes see Walgreens at high cap rates but they are subsidizing the lease to dollar store than went in until their obligation goes away. When that happens dollar store will want to renegotiate the rent rate etc.

So there is value usually in these properties but you have to be careful when buying and have a plan.   

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