In light of the continuing strength of the retail pharmacy market, Rite Aid experiences high demand in terms of net leasing desirability. This is partly because they are still America’s third biggest retail company in their industry. While there is an element of greater risk associated comparative to a Walgreen’s or CVS chain, the company has made clear efforts to improve its financials, including daily operations. Risk analysis still shows rewarding potential, considering their prime real estate visibility and NNN lease structuring. Part of the reason for commanding strong demand, is due to acquiring both Brook’s and Eckerd’s throughout various locations in the United States. While not favored negatively, the expenses incurred should require due diligence for investors when considering longer term leases. Sale-leasebacks have been a common occurrence with Rite Aid as of recent, making company owned properties available for purchase. To sweeten the deal, they offer understandably attractive rates versus the competition with twenty year initial lease terms and ten percent rent escalations every ten years. In fact, Rite Aid often accepts market average rates, which side-steps the issue of higher upfront costs. Since credit ratings are not seen as solid, combined with fewer stores being built, investors should take note of Rite Aid’s past sales revenue average. Not only this, but if taking advantage of a Rite Aid opportunity, it would be wise to consider the repurposing value of the real estate location in question. This may make or break a potential deal when analyzing profitability. Whereas a minimal upfront cost location can be acquired per square foot, or depending on acreage, it may be a great decision in the long term. Most Rite Aids range from 11k to 15k square feet in dimension situated approximately on one acre.
Lowest Cap Rate
Lowest cap rate over past 24 months
Average Cap Rate
12 mo avg with 5+ yr lease term
Average Property & Lease
|Average Sale Price||$2,000,000 - $7,000,000|
|Average NOI||$150,000 - $450,000|
|Building SF||11,000 - 15,000|
|Lease Term||20 Years|
With corporate based in Harrisburg, PA, the Rite Aid Corporation can be found on the NYSE under stock symbol RAD. As one of the top retail pharmacy chains in the U.S., in addition to being on the Fortune 500 list they have locations spanning thirty one states including Washington D.C.
Offering a wide array of products and service, Rite Aid focuses in the areas of prescription and OTC (over-the-counter) drugs, in addition to photo developing. The Rite Aid brand alone covers 3300 retail items. Other types of front end retail merchandise to be found: personal care, health, beauty, home, seasonal and holiday, as well as food and beverage.
Typically, each property structure measures around 12,500 sq. ft. in dimension, with over half of their total stores being stand alone. Many also offer drive through pharmacy pickups with 1-hour photo shops, as well as housing the familiar GNC company brand.
- Capitalization rates generally higher
- Prime corner properties
- Initial lease terms offer price bumps
- Lack of strong credit
- Stronger competitors
- Long term company outlook1962
COMPANY QUICK STATS
|Number of Locations||2,288|
|Key Principal||Heyward Donigan|