The time for Walgreen's property is now

Yeah but what does a private Walgreen’s mean to *property* investors? 

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Word is out this week that Walgreen’s is exploring the possibility of going private. The now-public drugstore chain is working with investment bank Evercore Partners to gauge interest from large private equity firms in footing the roughly $55 billion bill. That would make it the largest leveraged buyout ever.

Walgreen’s has a history of valuing its business privacy — particularly with regards to its prescription sales numbers — and for being at odds with Wall Street scrutiny. The market has battered them this year, pushing stock down 28% in the past 12 months. This move is thought to be prompted by management’s vision to be more autonomous with their strategies and partnerships.

Last week in this newsletter we pondered some numbers around the “retail apocolypse,” and discovered that the Amazon Effect isn’t so much killing brick-n-mortar stores, it’s just reshaping the live retail offering. Walgreen’s is a prime example of this, and while they’ve taken an  Amazon hit, they’re re-aligning in a way that is taking their physical stores in a positive direction.

Walgreen’s has pilot projects and tests with companies like the grocer Kroger, Microsoft, and primary care providers like Humana’s Partners in Primary Care and VillageMD, a developer of primary care clinics. This makes them less reliant on “Amazonable” products like shampoo, while creating revenue from real-time, location-centric services.

And they’ve announced plans to close 200 stores in this streamlining effort, which can sound ominous to property owners leasing to the chain. But these stores are all clearly declining and unprofitable locations, and removing that dead weight actually makes their other locations more valuable.

The conclusion here is that this news makes the investment market for Walgreens properties hotter than usual — Walgreens stock has jumped 6% on the news.

Under our NAI roof here, our overall highest-producing broker over the last several years also happens to specifically be a Walgreen’s expert. Senior VP Mary Alam, working with Investment Advisor CJ Brill, generally covers our retail channels here at NAI NorCal. And within that work, several transactions for both buyers and sellers of Walgreen’s-leased properties have crossed their desks.

The team very recently closed a deal here in the SF Bay Area, as well as representing locations in California’s Central Valley, Sacramento and South Carolina. And they have multiple off-market Walgreen’s options right now. And if you’re looking nationwide, we’ve also got Managing Director Joby Tapia representing a Walgreen’s property in Atlanta, in contract with contingencies removed.

ALL of these properties are the kind of high-traffic, high-performing, market-leading locations that Walgreen’s invests more into while they trim elsewhere. So contact us today if you’re interested in moving on this news while the ink is still wet…