Heads Up for Landlords and Investors – Walgreens Store Closings Announcement

Heads Up for Landlords and Investors – Walgreens Store Closings Announcement

Walgreens has announced that it will close some 200 stores in a cost-cutting effort.  The company hopes to realize $1.5 billion in cost savings by the end of 2017.  Walgreens has not yet announced the locations of the affected stores.

Walgreens are traditionally strong candidates for investors looking for NNN properties.  Before purchasing Walgreens properties, potential buyers need to be certain that the targeted store is not on the close list.  It is possible that Walgreens store sales will be put on hold altogether until Walgreens announces which locations will be closed which in turn could drive the price of other NNN properties higher.

At this point, we don’t know which stores will be affected or how Walgreens will implement its closing strategy.  But it is safe to assume that the company does not have 200 leases that are set to expire in the next 2 years.  Walgreens might simply choose to close its stores and default on its leases and risk its credit rating.  Or Walgreens could seek to negotiate Termination Agreements with its landlords.

Walgreens Landlords had best prepare for all possibilities by becoming familiar with the lease provisions.  Landlords should determine what their damages will be if Walgreens defaults or seeks early termination. Here are just a few of the questions that should be asked when any tenant defaults or asks for an early termination of the lease:

What is the remaining term on the lease?

• Who was responsible for tenant improvements?
• What are the default provisions and are there any limitations?
• Is the tenant responsible for Landlord’s attorneys’ fees?
• What about the cost to re-let and brokerage fees and brokerage fees previously paid?

Our real estate team represents both landlords and tenants in all aspects of lease negotiations.  Please feel free to contact us.