In the world of American commercial real estate, drugstores have long been considered one of the safest bets. National pharmacy chains like Walgreens were once viewed as nearly risk-free tenants. Some investors even joked, “If there’s a Walgreens down the block, you’ll sleep better at night.”
But those golden days are gone.
In the mid-2000s, Walgreens boasted a market cap of over $100 billion. It carried a pristine A+ credit rating from S&P and Aa3 from Moody’s. Back then, it was the darling of net lease investors. But things began to shift in 2010 when Walgreens acquired Duane Reade and took on $457 million of its debt. For a company that had built its brand on financial conservatism, this was a pivot—and not necessarily a wise one.
That acquisition led to the company’s first-ever credit downgrade. But the bigger issue was strategic: Walgreens had started down the path of using debt to fuel expansion. The full purchase of Alliance Boots in 2014 pushed its total debt load to $16 billion. At the same time, the company was hit by rising labor costs, slimmer prescription profit margins, and a failed contract negotiation with Express Scripts—a massive pharmacy benefit manager.
Fast forward to 2025, Walgreens' credit rating has now plummeted to BB- (S&P) and Ba3 (Moody’s), both officially below investment grade. In June, the chain announced it would be taken private by Sycamore Partners for $11.45 per share. The $23.7 billion deal includes $10 billion in cash and the assumption of Walgreens’ substantial debt. From Wall Street darling to distressed asset, it’s been quite a fall from grace.
To the average consumer, it may seem like just another corporate shuffle. But for the thousands of landlords across the country who lease their properties to Walgreens, the implications are very real—and very painful.
Today, about 70% of Americans live within five miles of a Walgreens. That figure is expected to drop. Just prior to its acquisition, the company announced it would close 1,200 stores—over 14% of its total U.S. footprint. That’s roughly 16.8 million square feet of soon-to-be-empty real estate.
At first glance, many landlords weren’t overly concerned. Walgreens typically occupies prime, high-traffic corners. The assumption was that if Walgreens left, someone else would gladly move in. But here’s the problem: Walgreens has been paying rents that are dramatically higher than market averages. Investors were willing to overlook this because of the chain’s rock-solid reputation and long lease terms—often 25 years or more, with no rent increases baked in.
Some brokers even marketed these leases as “75-year cash machines,” referencing the renewal options built into Walgreens’ contracts. That narrative worked—until it didn’t.
Now that Walgreens has lost its financial halo, landlords are facing a tough reality. If Sycamore Partners pushes the company into Chapter 11 bankruptcy (a common move in the private equity playbook), all bets are off. Rent payments for dark stores could simply stop. And landlords? They’ll be far down the list when it comes to collecting anything.
It’s not just theory—it’s already happened. Take Dave Foster, a real estate investor in Orange County, California. In 2008, he bought a Walgreens store on a 15-year lease with an annual rent of $570,000. Last year, the store closed with no warning. Dave expected to negotiate a buyout. Instead, he was passed to a lease restructuring firm that essentially said, “Take a big rent cut or we walk.” Dave didn’t have much of a choice.
So what can landlords do?
The first question: do you own the land (a ground lease), or do you own the building and the land?
If you own just the land and Walgreens built the store themselves, you may be in a great position. These ground leases often date back to when land values were much lower. Today, that same parcel may attract a better-paying tenant who’s willing to build something new—and you get to keep the current building for free if Walgreens walks. In this scenario, your best move is often to say “no” to any concessions.
But if you own the building and Walgreens is paying an above-market rent? Things get trickier. The rent level, parcel size, and current tenant interest all become critical. If you’re in a top-tier location and have offers from tenants like Chick-fil-A at nearly comparable rates, you’ve got leverage. If not, you may be facing deep cuts and long vacancies.
The landlords in the toughest position are those in secondary or tertiary markets—small towns, less trafficked corridors, areas with limited tenant demand. For them, this might be a slow, painful financial bleed.
That said, there are still strategies to soften the blow. Real estate advisor Paul Anderson, who has worked on dozens of distressed tenant situations, shares a few rules of thumb.
First, never show fear. The person calling you to renegotiate the lease will try to intimidate you. Your job is to stay calm and hunt for leverage. Ask questions like, “Why should I give a longer lease to a tenant who just admitted they’re struggling?” or “Why should my business (collecting rent) suffer because your business (selling sunscreen and greeting cards) isn’t working?”
Another trick: if you agree to reduce rent, insist on the right to terminate the lease in the future, or add a clause that allows you to cancel after a few late payments. That sends a message that you’re not desperate—and that you might have other options, even if you don’t.
And be patient. Bankruptcy is a long game. Many landlords who hold firm through the first wave of requests often find that the company backs down once it’s restructured enough of its other leases.
If there’s one lesson to take from all this, it’s that tenants are temporary—land is forever. Tenants fail. Buildings wear out. But land value, especially in prime locations, tends to hold. If you buy based on fundamentals—location, replaceable rent, tenant diversity—you’ll ride out the storms.
This isn’t just theory. In the words of veteran investor Mark Reynolds, who’s weathered three real estate cycles over 30 years:
“When you buy good dirt, good things happen.”
And:
“When your tenant leaves, do you want to be the one cold-calling businesses? Or do you want your phone ringing off the hook?”
Those aren’t just wise words—they’re survival strategies in today’s volatile retail landscape.