Roughly 100 Rite Aid retail leases and actual stores have been put on the block as the pharmacy chain takes measures to drastically slash its brick-and-mortar footprint as a critical part of its financial restructuring and bankruptcy process.
A&G Real Estate Partners, Rite Aid's real estate adviser, on Tuesday said it had begun marketing for sale 78 Rite Aid and Bartell Drugs neighborhood pharmacy leases, as well as 21 stores and land parcels owned by the retailer, pending approval by the U.S. Bankruptcy Court for the District of New Jersey. The initial leases and properties are available in private sales as part of Rite Aid’s reorganization.
As it moves through the Chapter 11 process, Philadelphia-based Rite Aid will continue "assessing its property footprint and close additional stores to improve its overall financial performance," according to A&G.
“Rite Aid, which operates more than 2,100 retail pharmacy locations across 17 states, is working collaboratively with its financial stakeholders to reduce its debt and position its business for success,” Andy Graiser, co-president of New York-based A&G, said in a statement. “Portfolio optimization is a powerful and essential part of that go-forward strategy.”
Rite Aid, the third-largest U.S. drugstore chain, filed for Chapter 11 bankruptcy protection on Sunday as a way to deal with its high debt levels, competition from larger rivals, and a deluge of lawsuits alleging that the pharmacy oversupplied prescription pain killers, a nationwide situation that has prompted a domestic opioid epidemic.
In court documents, Rite Aid said it has carefully analyzed its store fleet and that it must weed out and close underperforming stores that are dragging down its bottom line. The chain has already shuttered 210 stores in the past 12 months, and on Monday it gave the court a list of of 347 store locations — some already closed — requesting approval to walk away and reject leases.
The roughly 100 store leases and company-owned stores that A&G is selling are separate from and not part of that lease-rejection group.
"The stores we are marketing have not been rejected," A&G said in an email to CoStar News.
So it appears that there are roughly 450 stores so far that Rite Aid wants to close, either by rejecting their leases or selling them.
Including options, all the leases being marketed by Rite Aid have more than 10 years of remaining term, A&G said.
The initial leases offered by A&G are located in nine states:
- California, 16.
- Maryland, four.
- Michigan, 15.
- New Jersey, six.
- New York, 14.
- Ohio, one.
- Oregon, one.
- Pennsylvania, 12.
- Washington, six Rite Aid stores and three Bartell Drugs.
In addition, A&G is offering 21 stores and pieces of land that Rite Aid owns in 11 states:
- Alabama, one.
- California, one.
- Idaho, one.
- Michigan, one.
- New Hampshire, two.
- New Jersey, two.
- New York, three.
- Ohio, one.
- Oregon, one.
- Pennsylvania, five.
- Washington, one.
The owned and leased stores range from 6,400 to 37,154 feet, according to A&G. Some are located in downtowns, strip centers and power centers, while others are freestanding — including high-visibility stores with drive-thru windows.
“The size ranges of these properties are in high demand among potential replacement users — a list that includes dollar stores, gyms, grocers, specialty discount stores and fast-growing quick-serve restaurants,” A&G Senior Managing Director Mike Matlat said in the statement. “We anticipate robust interest from a wide array of retail operators, as well as non-retail medical, health, wellness and service-related businesses.”
A&G said as Rite Aid's restructuring process moves forward in the weeks ahead, it will market additional leases, with the total number depending on the outcome of ongoing negotiations between A&G and the retailer's Rite Aid landlords.
Rite Aid on Tuesday reported that bankruptcy judge Michael Kaplan had approved its so-called first-day motions following a hearing Monday, including granting interim approval for the retailer to access up to $3.45 billion in debtor-in-possession financing from certain lenders. This financing is expected to provide sufficient liquidity to support Rite Aid through the bankruptcy process.
“With the support of certain of our lenders and the majority of our bondholders, we look forward to moving through this process and emerging as a stronger company, well-positioned for long-term success," Jeffrey Stein, Rite Aid CEO and chief restructuring officer, said in the statement.