The recent announcement that Fred’s would purchase upwards of 600 locations from Walgreens/Rite Aid to help ensure approval of their merger, highlights an issue facing some owners of these properties. What happens if my property is slated to be closed?
Despite the 600 locations that Fred’s is going to take over, there will still likely be many other Walgreens and Rite Aid locations that will be in close proximity to each other, that one or the other will be shuttered. Landlords of these properties will of course, still be paid their contractual rents; however, the value of the property will decline substantially.
Adaptive reuse of a property like a pharmacy has also proved difficult in the past. Traditionally their footprints have been unique to the pharmacy business model and not very amenable to transitioning them to another use.
Thankfully, previous mergers, such as the Rite Aid and Eckerd merger in 2006, may give owners of these soon to be vacant properties some ideas. The Rite Aid merger with Eckerd resulted in a number of overlapping stores closing. While the owners of these properties were still receiving their guaranteed rents, Rite Aid was faced with paying rent on stores that were no longer were operating. Subleasing these vacant stores could soften the hit, but how do you find a willing tenant?