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10 US, 4 UK retail REITs report Walgreens as a top tenant; 400 stores to close

Ten publicly traded U.S. equity real estate investment trusts and four retail REITs headquartered in the U.K. report Walgreens Boots Alliance Inc. as one of their top tenants.

The drugstore company announced Aug. 6 that it plans to close roughly 200 stores in the U.S. The company in late June confirmed it would close 200 stores in the U.K. The closings come as part of Walgreens' transformational cost management program — an initiative launched in December 2018 that is expected to deliver more than $1.5 billion of annual cost savings by fiscal 2022.

Single-tenant focused Realty Income Corp. has the highest exposure to Walgreens of any publicly traded U.S. equity REIT in terms of the percentage of annual rental revenue it receives from the company. As of June 30, Realty Income had 215 leases with Walgreens, 5.8% of its total rental revenue, making it the REIT's largest tenant.

Agree Realty Corp. reported the next-largest exposure to the retailer, at 4.3% of its total annualized base rent, while VEREIT Inc. and Spirit Realty Capital Inc. followed at 3.3% and 3.0%, respectively.

Four publicly traded U.K. retail REITs reported Boots as a top tenant in their most recent filings. Walgreens' U.K. segment operates under the Boots U.K. Ltd. brand name, and closures are expected to take place over the next 18 months.

Approximately two-thirds of the locations to be closed are within walking distance of another Boots store, Walgreens Executive Vice President & Global CFO James Kehoe said on the company's fiscal third-quarter earnings call, according to a transcript. About 60% of the planned closures are failing to turn a profit, he added.

Intu Properties PLC has the largest exposure to Boots, with 23 leases representing 3% of the shopping center REIT's total rental income. British Land Co. PLC reported that leases with Boots make up 1.9% of its rental revenue, while Hammerson PLC and Land Securities Group PLC generated 1.6% and 1.5% of their rental income from Boots, respectively.

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