5 ms·

TLDR: The tennants are mostly still paying their Monthly leases, and the rates are often higher than what a small company, or a company that wants to partially

TLDR: The tennants are mostly still paying their Monthly leases, and the rates are often higher than what a small company, or a company that wants to partially use that space would pay.

Pet_Ant 2y ago
> The most common reason is a concept called “dark rent.” Pharmacy companies are seeking to cut their losses by shuttering unprofitable stores that have high labor costs, ... but in most cases they are obligated to continue paying the rent long after the store closes, or goes dark. Most of the pharmacies that have closed in recent years were signed to 10-, 15- or even 20-year leases, at rents that often exceed today’s rates, brokers said. In these cases, a landlord has almost no incentive to seek a new tenant, allowing the store to sit empty for months or years, Surprised that the leases weren't tied to some shell company that could go bankrupt and release that liability.
- Nifty3929 2y ago
  The building owner wouldn't have allowed that. The whole point of making these long-term NNN leases is that you're getting a very stable anchor tenant that will not default.
  - ahmeneeroe-v2 2y ago
    exactly right. For the GP: Even though these leases are above current market value, they were probably cheaper at the time they were signed due to being long-term and bring signed by a higher credit rated tenant who would likely not default (vs a short-term lease with a riskier tenant)
- barryrandall 2y ago
  It's a deliberate act intended to prevent competitors from moving in to the space.
  - stonogo 2y ago
    Their competition is online.
    - deleted 2y ago
      [deleted]
  - deleted 2y ago
    [deleted]
  - PaulHoule 2y ago
    Duane Reade in particular is famous for its Machiavellian approach to real estate. Sometimes I wonder if people who grew up in NYC think there are Duane Reades from coast to coast but they are hyperlocal or they were until they got bought by Walgreens/Boots Alliance.
- ahmeneeroe-v2 2y ago
  A savvy landlord would not accept this. Mostly landlords either want a Parent Guarantee (i.e. the parent corp to back up the lease liability) or would want to see the parent company sign the lease. Obviously there are a lot of factors that go into a negotiation and sometimes landlords are not able to secure those rental streams through one of those methods.
n1b0m 2y ago
Can’t they sublet?
- mandevil 2y ago
  Pharmacies have strict requirements for drug storage and the like (source: wife is a pharmacist). It is possible that being adapted for a big pharmacy makes a space unsuitable for other uses? As the article points out, the big box pharmacies have been replaced by smaller more drug focused ones, it's just the big chain heavy retail footprint places that are fewer in number. But those new pharmacies aren't going into the big spaces of the old, and it's possible that the needs for C2 storage, cold storage, etc. make it more difficult to work with the space for a purely retail or food concept.
  - Scoundreller 2y ago
    I mean, you might have a big safe, but it’s nothing like a built-in bank vault. Though the “we just do meds” pharmacies are dying out in Canada as the margin is increasingly in the unregulated (price) over-the-counter products and you increasingly need the buying power of being a part of a chain for both meds and over-the-counter stuff. Sure if you can specialize in something you can survive against the chains, but it’s a slog.
    - mandevil 2y ago
      My wife (1) says that is largely true too here in the US, that independent pharmacies are getting hammered on reimbursement rates and dropping like flies. But the NYTimes article says that the total number of pharmacies has stayed relatively constant since 2018, but that the number of big box chain pharmacies has dropped by half, so there might be some weird NYC exception to the general behavior? 1: She works in a hospital now, so she's not directly exposed to this, but she's worked in retail before and has plenty of friends who still do.
  - hansvm 2y ago
    Those sorts of requirements are transient. It took something like a week of heavy labor for me to jackhammer out a reinforced bank safe to make room for a pet grooming facility. The majority of the cost to the new tenant was renting the jackhammer. It's not free, but on the scale of starting a new business it's not a big deal to retrofit a space.

TLDR: The tennants are mostly still paying their Monthly leases, and the rates are often higher than what a small company, or a company that wants to partially use that space would pay.

Pet_Ant 2y ago

> The most common reason is a concept called “dark rent.” Pharmacy companies are seeking to cut their losses by shuttering unprofitable stores that have high labor costs, ... but in most cases they are obligated to continue paying the rent long after the store closes, or goes dark. Most of the pharmacies that have closed in recent years were signed to 10-, 15- or even 20-year leases, at rents that often exceed today’s rates, brokers said. In these cases, a landlord has almost no incentive to seek a new tenant, allowing the store to sit empty for months or years, Surprised that the leases weren't tied to some shell company that could go bankrupt and release that liability.

Nifty3929 2y ago
The building owner wouldn't have allowed that. The whole point of making these long-term NNN leases is that you're getting a very stable anchor tenant that will not default.
- ahmeneeroe-v2 2y ago
  exactly right. For the GP: Even though these leases are above current market value, they were probably cheaper at the time they were signed due to being long-term and bring signed by a higher credit rated tenant who would likely not default (vs a short-term lease with a riskier tenant)
barryrandall 2y ago
It's a deliberate act intended to prevent competitors from moving in to the space.
- stonogo 2y ago
  Their competition is online.
  - deleted 2y ago
    [deleted]
- deleted 2y ago
  [deleted]
- PaulHoule 2y ago
  Duane Reade in particular is famous for its Machiavellian approach to real estate. Sometimes I wonder if people who grew up in NYC think there are Duane Reades from coast to coast but they are hyperlocal or they were until they got bought by Walgreens/Boots Alliance.
ahmeneeroe-v2 2y ago
A savvy landlord would not accept this. Mostly landlords either want a Parent Guarantee (i.e. the parent corp to back up the lease liability) or would want to see the parent company sign the lease. Obviously there are a lot of factors that go into a negotiation and sometimes landlords are not able to secure those rental streams through one of those methods.

n1b0m 2y ago

Can’t they sublet?

mandevil 2y ago
Pharmacies have strict requirements for drug storage and the like (source: wife is a pharmacist). It is possible that being adapted for a big pharmacy makes a space unsuitable for other uses? As the article points out, the big box pharmacies have been replaced by smaller more drug focused ones, it's just the big chain heavy retail footprint places that are fewer in number. But those new pharmacies aren't going into the big spaces of the old, and it's possible that the needs for C2 storage, cold storage, etc. make it more difficult to work with the space for a purely retail or food concept.
- Scoundreller 2y ago
  I mean, you might have a big safe, but it’s nothing like a built-in bank vault. Though the “we just do meds” pharmacies are dying out in Canada as the margin is increasingly in the unregulated (price) over-the-counter products and you increasingly need the buying power of being a part of a chain for both meds and over-the-counter stuff. Sure if you can specialize in something you can survive against the chains, but it’s a slog.
  - mandevil 2y ago
    My wife (1) says that is largely true too here in the US, that independent pharmacies are getting hammered on reimbursement rates and dropping like flies. But the NYTimes article says that the total number of pharmacies has stayed relatively constant since 2018, but that the number of big box chain pharmacies has dropped by half, so there might be some weird NYC exception to the general behavior? 1: She works in a hospital now, so she's not directly exposed to this, but she's worked in retail before and has plenty of friends who still do.
- hansvm 2y ago
  Those sorts of requirements are transient. It took something like a week of heavy labor for me to jackhammer out a reinforced bank safe to make room for a pet grooming facility. The majority of the cost to the new tenant was renting the jackhammer. It's not free, but on the scale of starting a new business it's not a big deal to retrofit a space.