The nation's 3rd largest drugstore operator has not performed aswell as sector leaders, Walgreens andCVS.Rite Aid has been taking steps to strengthen its balance sheet andimprove its overall business. Accordingly, if you own or would liketo own Rite Aid net lease properties then you must consider therisk-reward outcomes and accept higher risk compared to CVS andWalgreens. However, Rite Aid offers the opportunity for a higherreturn than its competitors in the net leasePharmacy Sector.

Corporate Rite Aid currently faces a number of challenges yetthey have long been a popular asset in the net lease market due tostrong fundamentals: highly demanded corner locations and long-termNNN leases. The overall stability of the pharmacy sector alsocreates interest and demand for Rite Aid net lease properties. Withtheir acquisition of pharmacy chains Brooks in the northeast andEckerd's in the Carolina's and Georgia, Rite Aid has been able toremain as one of the largest pharmacy chains in the nation inregards to market presence.

Between the acquisition of rival chains and its financial woes,Rite Aid has been selling corporate owned sites throughsale-leaseback transactions, and in the process has been willing toprovide more favorable lease terms than its competitors. Rite Aidhas been offering a 20-year primary term with 10.00% rentalincreases every 10 years, often agreeing to lease rates that arein-line with the local market rather than paying significantpremiums. New store openings has diminished and most of the newlyleased Rite Aid-occupied properties have been generated through thesale-leaseback process, which may offer an opportunistic investor alook at historical store sales, potentially alleviating some of therisk associated with the creditworthiness. The re-use orredevelopment of these net-leased assets is of utmost importance tocurrent investors when evaluating Rite Aid investments. Theunderlying real estate asset may be the driving force behindinvestment decisions. Real estate fundamentals may be favorable insome locations with higher cap rates allowing a purchase on a lowprice per SF basis for the land or building, as typical sites have11,000 - 15,000 SF buildings located on 1.00+ acres of land.

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Jonathan Hipp

Jonathan Hipp began his career in real estate over 25 years ago. In his early years as a broker, he ventured into the net lease industry and quickly began leading the US net lease market, closing over $3 billion in transactions. In 2005, Jon founded Calkain Companies, a company focused solely on net lease investment services. As President and CEO, he has been instrumental in building the firm into one of the leading Net Lease real estate companies, transacting over $12 billion of net lease deal volume over the past 13 years. He has expanded Calkain’s services to include brokerage, advisory, asset management, capital markets, and industry research. He has become a well-known resource, panelist, and speaker at various Net Lease and Industry conferences and is a regular contributor to on real estate trends. In June 2015, Jon’s passion for the real estate business was again recognized as he was nominated for the Top Real Estate Player in the DC area by SmartCEO magazine.