On the Ground by DealGround

March 20, 2025

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Welcome to On The Ground by DealGround - where deep dives, expert analysis, and real insights take center stage. If you’re satisfied with the same tired industry chatter, go ahead and unsubscribe below - no hard feelings.

If you want real, no-nonsense insights that actually move the needle, stick around. Every other Thursday we’ll send you On The Ground by DealGround to your inbox. Let’s get started. 

Our Take: A Prescription for Disaster (2 min read)

For decades, Walgreens was the gold standard for net leased investments: A+ credit rating, a $100B market cap, and rock-solid leases. Then, a change in corporate strategy turned renowned stability into a ticking time bomb.

  • 2010 – Duane Reade Acquisition: When Walgreens took on $457M in debt, investors got a serious wake up call. This wasn’t the same company anymore.

  • Express Scripts Miscalculation: Walgreens overestimated its negotiating leverage which cost them a key strategic network.

  • 2014 – Alliance Boots & Beyond: Debt ballooned to $16B. Add in rising labor costs and opioid settlements, and it’s no surprise, more credit rating downgrades followed.

  • Today: Sycamore Partners is taking Walgreens private at $11.45 per share. To start, 1,200 stores (14% of total locations) are scheduled to close - leaving 16.8M sq. ft. of vacancy coming to market. Ouch.

A Coming Nightmare for Walgreens Owner’s

Many investors (mostly private owners) banked on Walgreens’ long-term leases, ignoring the reality: many of those rents were not replaceable.

  • Lease Vulnerability: Bankruptcy restructuring could mean drastic rent cuts or terminations.

  • How Secure is a Walgreens Lease, Really?: Even the best tenants have their worst stores. The bad stores can sink the whole ship. The quality of the location is everything.

Our Predictions:

  1. Owners of Walgreens Ground Leases: Very likely have strong leverage. Pro tip, hold firm.

  2. Secondary/Tertiary Market Locations: This sucks but large rent reductions, extended vacancy, and asset devaluation (not to mention carrying costs, tenant improvement contributions, and leasing commissions) are on the horizon. Get ready. 

Want more? Read the DealGround deep dive analysis: Prescription for Disaster: The Downfall of Walgreens

The Future Is AI-Driven – Are You Ready?

The impending doom of a Walgreens meltdown underscores the importance of having market data expertise. This may be the first shoe to drop - and it’s a big shoe. He who has the best information will have a strategic advantage. 

The future belongs to those who leverage real-time data and AI-driven insights to anticipate risks and make more informed decisions so they don’t become expensive lessons.

Enter DealGround

DealGround was built by commercial real estate professionals for brokers and investors. We have built a platform with the tools (think wizard-level market knowledge) to help you make smarter decisions and stay ahead of the game. 

Bottom Line

Relying on a tenant to preserve asset value is a losing proposition. If Walgreens pulls the plug tomorrow, can these owners replace their rent? If not, they likely made a very costly mistake.

Join us and forward-thinking investors and brokers in our Early Access Beta —your partner in an AI-driven future.

Stay sharp. Stay ahead. The next issue of On The Ground will be in your inbox in two weeks.

Thanks for reading.

DealGround

P.S. This isn’t just another newsletter with generic ai commentary or a pitch for a redundant tech solution - it’s an invitation to get ahead, stay ahead and elevate your knowledge to make money. Learn more at DealGround