Retail’s go-to downsizing firm moves on to Walgreens

Look at some of the most prominent retail bankruptcies in recent years and one company's name keeps popping up: A&G Real Estate Partners.

Melville, New York-based A&G is currently advising luxury retailer Saks Global in its Chapter 11 case — one of the most high-profile retail bankruptcies in recent years. The company also worked on the Bed Bath & Beyond, Party City, Big Lots, Joann, Container Store and Rite Aid Chapter 11 proceedings.

When a chain files for bankruptcy protection, it likely will be forced to close some or all of its stores as part of the reorganization or potential liquidation process. A&G has often been appointed as an adviser to retailers in these bankruptcy proceedings, charged with selling the leases for the stores going dark.

A&G was an exhibitor at this week's ICSC retail real estate conference in Las Vegas where it was working on its latest assignment. It's marketing a mix of 78 Walgreens store leases and owned properties nationwide as that giant pharmacy operator downsizes its portfolio. A&G says more troubled retailers, including Walgreens, are restructuring real estate out of court to avoid rising Chapter 11 costs.

Last year, A&G successfully sold leases for another drugstore chain — Rite Aid, which entered bankruptcy for a second time and winded down operations. It remains to be seen if the restructuring firm will have the same success with Walgreens. Pharmacies physically have distinctions in terms of layout, for example, that often don't make them an easy fit for many retailers, A&G Principal Joe McKeska told CoStar News.

Most recently fast-growing retailers — such as the off-price chains and dollar stores — have been snapping up leases for vacant stores in lease sales and auctions. U.S. retail space is very scarce, with obsolete malls being demolished and little shopping venue construction. In some ways that scarcity has strengthened A&G’s position as it tries to sell leases for downsizing chains.

A&G expects the same kinds of retailers that were interested in the Rite Aid stores to be interested in Walgreens, as well as possibly specialty grocery chains and healthcare providers, according to McKeska.

A&G executives met with retailers at the ICSC convention to solicit offers for the available Walgreens leases and properties that are on the block. There were also sessions with investors and lenders.

"We've already reached out to most retailers that we believe may have interest, provided them with the information," McKeska said. "And we use [the ICSC convention] as an opportunity to meet with them and understand where they're at with reviewing the portfolio, getting back to us with feedback on what their interest would be."

A&G has relationships with many growing national retailers, according to McKeska.

"We also, in many cases, have a local-broker partner that will market [a lease] locally, find somebody who might be a healthcare provider, medical office or something of that nature who they know is looking," he said.

In March last year, Walgreens parent Walgreens Boots Alliance announced it was going private in a $10 billion buyout deal with Sycamore Partners. Prior to that, the pharmacy chain said it planned to shutter roughly 1,200 underperforming U.S. stores. Just a few months ago, A&G got the assignment to market 60 Walmart leases and 18 owned land parcels, stores and other real estate assets across 27 states and Puerto Rico.

The owned and leased Walgreens buildings range from 2,070 to 23,509 square feet while the undeveloped parcels range from less than an acre to roughly 21 acres. The leased stores are freestanding or in central business districts, with some end cap and inline locations, across 22 states. Barnes & Noble is already a subtenant in a former Walgreens, McKeska said.

A&G handled the sale of over 1,000 Rite Aid store leases last year, according to Andy Graiser, co-president of the firm. A&G cited that strategic campaign when it announced it was selling the Walgreens leases last month.

"We had more than 1,700 interested parties competing for those locations and sold leases to Dollar Tree, Five Below, Burlington, Ross, Ace Hardware and multiple grocery chains," McKeska said in a statement at that time. "We also sold 50 fee-owned Rite Aid properties to investors looking to re-tenant or redevelop. We expect a similar level of demand for these desirable Walgreens assets."

However, he told CoStar News that former pharmacies are not an easy transition for some retailers.

"It's the size, it's the layout, it's the parking," McKeska said. "They don't have loading docks. ... The parking is laid out typically around the building. And it's the number of parking stalls versus a traditional retailer. A drugstore might have three or three and a half cars per thousand square feet, whereas a traditional retailer wants a minimum of four and a half to five."

Nonetheless, "there's still interest because there's very little retail space available versus what people are looking for, so people are starting to get more creative," according to McKeska.

The Rite Aid lease sales generated roughly $95 million, according to A&G. And 50 Rite Aid-owned properties were also sold. Specialty retailers Barnes & Noble, Books-A-Million, Cavender's, Hobby Lobby and Michaels also used A&G auctions to acquire real estate assets from Rite Aid as well as Party City, Big Lots and Joann, among others.

A&G also worked for The Container Store after it filed for Chapter 11 in January last year. In that case, A&G said it found "$109 million in occupancy cost reductions within just 37 days of the retailer's" bankruptcy filing, "giving the chain a more efficient cost structure to better align with today's market." In April, Bed Bath & Beyond agreed to acquire the newly restructured Container Store for $150 million.

The pace of Chapter 11 filings has slowed down this year, according to Graiser. At one point, from September 2024 to December, almost 100 million square feet of retail space hit the market, he said.

Walgreens isn't the only example of A&G selling leases for downsizing retailers that aren't in bankruptcy court. It's handling the same task for Sleep Number, Leslie's Pools and SoulCycle, Graiser said.

Selling store leases isn't without its pitfalls and potential problems, particularly over an off-price chain taking a space.

Saks Global — parent of Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman — tapped A&G as its real estate adviser in January after the luxury retail giant filed for Chapter 11. Saks Global closed most of its off-price Saks Off 5th chain and plans to shutter 18 Saks Fifth Avenue and three Neiman Marcus stores.

In February, A&G put 59 Saks Off 5th leases on the block. By March, off-price retailers Burlington Stores and Ross Dress for Less were among the bidders that offered a total of $36.3 million for about half the available Saks Off 5th store leases.

But one landlord wasn't happy. The Outlet Shoppes at Atlanta filed an objection in bankruptcy court in April seeking to block Saks Global from "assigning," or essentially selling, its unexpired lease for a 25,000-square-foot Saks Off 5th anchor space at the shopping center.

The outdoor mall, owned by CBL Properties and Horizon Group Properties, alleged that Burlington replacing Saks Off 5th would "destroy" The Outlet Shoppes' image as a home to "luxury and near-luxury brands."

A&G Co-President Emilio Amendola is handling Saks Global's leases, and he declined to comment on their status, referring questions to the upscale retailer.