Investing in something like CVS or Walgreens, what if they go bankrupt? Corporate backed lease question.
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[{"id": "g0to4eq", "text": "Depends on what the lease says your remedies are if the tenant defaults", "replies": [{"id": "g0tpj56", "text": "This too; op should find out how much of the term is guaranteed as well as termination options.  I would assume the cvs mothership provides the guarantee.", "replies": [], "depth": 2}], "depth": 1}, {"id": "g0tokiu", "text": "Don't know much about Walgreens but CVS is generally a good, reliable credit tenant. They would buy out the lease. Im not caught up on how covid has affected their stores, but theyre unlikely to pull any funny business on you unless the whole company goes bk, which i dont think is likely. Edit: I do know of CVS stores around the midwest that have been selling during the covid downturn, one of the few bright spots in a weird market.", "replies": [], "depth": 1}, {"id": "g0tt05r", "text": "these two have really solid credit. Also, both have pivoted and performed well during covid. if you have the parent backing the lease, i\u2019d sit back back, relax and collect your checks.\n\nedit: this assumes they don\u2019t have lease termination options or anything that they can use to exit without much penalty.", "replies": [], "depth": 1}, {"id": "g0tt43g", "text": "If they go bankrupt and file chapter 11, then the courts will likely vacate the leases and you\u2019d be left with an empty building.", "replies": [], "depth": 1}, {"id": "g0tt7ij", "text": "Basically you are fucked. You will have recourse but you will be last in line. If they are filing bankruptcy you won\u2019t be able to evict them during the bankruptcy proceedings. We owned a Shopko (Shitco) and we got nothing but a vacant building and a claim that is useless.", "replies": [], "depth": 1}, {"id": "g0tvswb", "text": "It's going to depend on the particulars. First and foremost how well does this particular store perform? Often times bankruptcies are used to get rid of badly performing stores and keep the good ones. Buyouts usually happen when times are good and they have money to rearrange locations and leases. The problem is the reuse. The only consistent reused for Walgreens/CVS/Rite-aids have bee as dollar trees. I can't imagine they are paying anywhere as well as the former tenant though.", "replies": [], "depth": 1}, {"id": "g0tw6io", "text": "these deals should be (and usually are) bondable leases - that is, there are no outs.  I suggest hiring a real estate lawyer who can confirm the length of the lease and that there is no way the tenants can terminate early.  There should be no maintenance, payment or other obligations on your part, as you should be getting a true \"net\" rent.  The lease is typically structured with a non-rated entity as the tenant BUT there is a corporate guaranty from the parent company, which is an investment grade entity.  The only risk you are taking is bankruptcy risk of the corporate parent; as others have pointed out, that risk is minimal if you are dealing with a CVS or Walgreens.", "replies": [], "depth": 1}]