HOME  |  ABOUT  |  NET LEASE 101  |  CONTACT  |  SUBSCRIBE



7-Eleven
Advance Auto Parts
Affordable Dentures
ALDI
Applebee's
Arby's
Ashley Furniture
AutoZone
Bank of America
BankUnited
BB&T Bank
Best Buy
BMO Harris Bank
Bojangles'
Burger King
Captain D's
Chase Bank
Chick-fil-A
Chipotle
Church's Chicken
Circle K
Cracker Barrel
CVS
Dairy Queen
DaVita
Dollar General
Dollar Tree
Dunkin' Donuts
Family Dollar
FedEx
Fred's Super Dollar
Fresenius Medical Care
Hardee's
Hobby Lobby
IHOP
KFC
Kohl's
Mattress Firm
McDonald's
Napa Auto Parts
O'Reilly Auto Parts
Panera Bread
PDQ
Pep Boys Auto
PNC Bank
Red Lobster
Rite Aid
Sheetz
Shell Oil
Sherwin-Williams
Starbucks
Steak 'n Shake
SunTrust
Taco Bell
TD Bank
Tractor Supply Co.
Verizon
Walgreens
Walmart
Wawa
Wegmans
Wendy's
Zaxby's
  Rite Aid


Average Property & Lease

Average Sale Price$6,022,446
CAP Rate (12mo avg with 10+ lease term)6.44%
NOI$374,783
$/Square Foot$200 - $400
Building Size14,564 sf
Lot Size1.40 +/- acres
Lease Term20 Year NNN
Escalations10% Every 10 Years
CREDIT RATING
B
S&P
B2
Moody's
view credit rating chart
View Net Lease Property Listings at CALKAIN.COM Last Updated: September 26, 2016
Net Lease Advisor Overview

The nation's 3rd largest drugstore operator has not performed as well as sector leaders, Walgreens and CVS. Rite Aid has been taking steps to strengthen its balance sheet and improve its overall business. Accordingly, if you own or would like to own Rite Aid net lease properties then you must consider the risk-reward outcomes and accept higher risk compared to CVS and Walgreens.

Corporate Rite Aid currently faces a number of challenges yet they have long been a popular asset in the net lease market due to strong fundamentals: highly demanded corner locations and long-term NNN leases. The overall stability of the pharmacy sector also creates interest and demand for Rite Aid net lease properties. With their acquisition of pharmacy chains Brooks in the northeast and Eckerd's in the Carolina's and Georgia, Rite Aid has been able to remain as one of the largest pharmacy chains in the nation in regards to market presence. However, the cost of those acquisitions is weighing heavily on their balance sheet, creating significant concern for their long term viability.

Between the acquisition of rival chains and its financial woes, Rite Aid has been selling corporate owned sites through sale-leaseback transactions, and in the process has been willing to provide more favorable lease terms than its competitors. Rite Aid has been offering a 20-year primary term with 10.00% rental increases every 10 years, often agreeing to lease rates that are in-line with the local market rather than paying significant premiums. New store openings has diminished and most of the newly leased Rite Aid-occupied properties have been generated through the sale-leaseback process, which may offer an opportunistic investor a look at historical store sales, potentially alleviating some of the risk associated with the creditworthiness. The re-use or redevelopment of these net-leased assets is of utmost importance to current investors when evaluating Rite Aid investments. The underlying real estate asset may be the driving force behind investment decisions. Real estate fundamentals may be favorable in some locations with higher cap rates allowing a purchase on a low price per SF basis for the land or building, as typical sites have 11,000 - 15,000 SF buildings located on 1.00+ acres of land.
 

Pros

Cons

  • Rental increases in primary term of lease
  • Corner locations
  • Higher cap rates than competition
  • Tenants credit
  • Future viability of Rite Aid
  • Out positioned by stronger competition in some markets
Tenant Description

Rite Aid Corporation is one of the leading drugstore chains in the United States and a Fortune 500 company. The Company operates its drugstores in 31 states across the country and in the District of Columbia.

Rite Aid is headquartered in Camp Hill, a suburb of Harrisburg, Pennsylvania, and is publicly traded on the New York Stock Exchange under the ticker RAD.

Rite Aid stores service prescription drug customers and offer an assortment of other general merchandise, which it calls front-end products. Front end products include over-the-counter medications, health and beauty aids, personal care items, cosmetics, household items, beverages, convenience foods, greeting cards, seasonal merchandise, and other everyday and convenience products, as well as photo processing. It offers approximately 3,300 products under the Rite Aid private brand.

The overall average size of each store in the Company's chain is approximately 12,500 square feet. Over 50% of its stores are freestanding and approximately 50% of its stores include a drive-thru pharamcy. Many locations also feature one-hour photo shops and include a GNC store-within-Rite Aid-store.


RITE AID TREND
CAP Rate

2014 avg: 8.18%

2015 avg: 7.40%

RECENT SALES

Vineland, NJ

$1,875,000 | 8%

Ramona, CA

$4,450,000 | 8.24%

MORE INFO
www.riteaid.com
Google Finance: RAD
Google News: RAD