The poster-child of net lease properties, Walgreens has been a highly traded investment property given the low risks typically associated with these drugstore properties. Additionally, the drugstore sector remains stable given is nondiscretionary merchandise offerings.

On the real estate side of things, Walgreens demands premier hard corner locations greater than 1.00 acre. Generally, sites are 1.15 - 1.75 acres to fit their store prototypes of 14,820 SF, although units can range from 10,800 SF - 15,000 SF. To compete with rival CVS, Walgreens has generally been willing to pay premier rental rates to secure prime sites with a primary lease term of 20 or 25 years. The most significant lease variation from Walgreens of late has been the difference in their renewal options, previously requiring eight to ten renewal options of five years in length; they recently signed a number of leases that were 75 years in length, however after the 25th year Walgreens has an annual cancelation option, essentially creating 50 1-year renewal options. This small variation created significant concern for investors because at the end of the initial 25-year lease term, these assets will not be financeable.

Walgreen Company (NYSE: WAG) is the nation's largest drugstore retailer in terms of sales, even though it has fewer store locations than its closest competitor CVS. Walgreens and its competitor drugstores are engaged in the retail sale of prescription and non-prescription drugs and front-store products such as beauty care, personal care, household items, candy, photofinishing, greeting cards, convenience foods and seasonal items, as well as liquor and tobacco where permissible by law.

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Net Lease Tenant Profile: Walgreens

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