Rite Aid identifies initial 154 stores for closure under bankruptcy plan

Rite Aid has earmarked 154 drug stores in 15 states for closure and put up another 99 stores for sale in 12 states under its Chapter 11 bankruptcy plan.

In court documents filed on Monday, Philadelphia-based Rite Aid identified an initial group of stores to be shut and indicated that additional stores may be closed at future dates. Most of the stores announced for closure are located in the Northeast and on the West Coast—Rite Aid’s strongest markets—but are spread across the country.

So far, plan call for stores to be closed in Pennsylvania (39), California (31), New York (20), Michigan (19), New Jersey (12), Washington (11), Maryland (6), Ohio (6), Virginia (2), Delaware (2), Idaho (2) and one each in New Hampshire, Oregon, Massachusetts and Connecticut, according to the filing in the U.S. Bankruptcy Court in New Jersey.

Rite Aid operated 2,111 stores in 17 states under the Rite Aid and Bartell Drugs (about 60 locations) banners when announcing its Chapter 11 filing on Monday. Seattle-based Bartell, with stores in the Puget Sound area, was acquired by Rite Aid in the fall of 2020. Four of the Washington locations named in the initial group of stores to be closed are Bartell stores.

In its disclosure statement for its Chapter 11 reorganization plan, Rite Aid noted that a “sub-optimal retail footprint”—including unprofitable stores and an inability to exit poor leases even when stores are closed—has proved to burdensome for its finances. In late September, the Wall Street Journal had reported that Rite Aid may close 400 to 500 locations under Chapter 11 as well as divest or shut an uncertain number of stores.

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Optimizing the store base

To help sift out underperforming stores, Rite Aid has tapped New York-based A&G Realty Partners to assist with its store divestiture, closing and lease restructuring program under the Chapter 11 plan.

A&G took a first step on Tuesday in unveiling plans “to market for sale” 78 Rite Aid and Bartell Drugs pharmacy leases in nine states plus 21 fee-owned properties in 11 states, pending bankruptcy court approval.

The initial leases put on the selling block are in California (16), Michigan (15), New York (14), Pennsylvania (12), New Jersey (6), Washington (6 Rite Aid, 3 Bartell stores), Maryland (4), Ohio (1) and Oregon (1).

Fee-owned properties (including stores and land) up for sale include locations in Pennsylvania (5), New York (3), Ohio (3), New Hampshire (2) and New Jersey (2), as well as one each in Alabama, California, Idaho, Michigan, Oregon and Washington.

Related:Rite Aid declares bankruptcy

“Rite Aid, which operates more than 2,100 retail pharmacy locations across 17 states, is working collaboratively with its financial stakeholders to reduce its debt and position its business for success,” Andy Graiser, co-president of A&G Realty Partners, said in a statement. “Portfolio optimization is a powerful and essential part of that go-forward strategy.”

The initial leases and properties are available in private sales and, including options, all leases being marketed by Rite Aid have more than 10 years of remaining term, A&G noted. The owned and leased stores range from 6,400 to 37,154 feet and are located in downtowns, strip centers, power centers and freestanding sites, including high-visibility stores with drive-thru windows, the real estate firm said

“In the highly competitive national chain drug store business, finding prominent, high-quality real estate has always been a top priority, and the locational characteristics of many of Rite Aid’s stores are part of what make this such an extraordinary opportunity for retailers, restaurants and real estate investors,” according to A&G Senior Managing Director Todd Eyler.

Potential new tenants for the Rite Aid sites include dollar stores, gyms, grocers, specialty discount stores and quick-serve restaurants, reported A&G Senior Managing Director Mike Matlat, who added that such properties are in “high demand” due to their size ranges.

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“We anticipate robust interest from a wide array of retail operators, as well as non-retail medical, health, wellness and service-related businesses,” Matlat commented.

Rite Aid will continue evaluating its property footprint and shut more stores to improve its overall financial performance, said A&G, which expects to market additional leases, with the total number based on negotiations between A&G and Rite Aid landlords.

The “quickly moving plan” focuses on “exiting certain locations to ensure optimal performance of Rite Aid's real estate footprint,” A&G added.

“Our role also includes advising on lease portfolio optimization as Rite Aid strengthens its overall financial performance by reducing its rent expenses while continuing to meet the needs of its customers, communities and associates," Graiser stated. “As it does so, other retailers and investors will gain access to some strong locations, in many cases with complementary co-tenants, in attractive markets across the United States.”