News Summary
Rite Aid has filed for Chapter 11 bankruptcy protection for the second time in two years, prompting the closure of all 33 stores in New York City by June 2023. The company is grappling with $2 billion in debt, attributed to lawsuits linked to the opioid crisis and intense competition. The closures will affect 526 union jobs, raising concerns over community access to essential pharmacy services. An auction for the leases of the New York locations is scheduled for July, with key sites available for potential bidders.
New York City – Rite Aid has filed for Chapter 11 bankruptcy protection again, marking its second bankruptcy in two years as of May 5, 2023. The company is seeking relief from approximately $2 billion in debt, which has primarily stemmed from lawsuits tied to the opioid epidemic and fierce competition from rival pharmacy chains, including CVS and Walgreens.
As a direct result of this bankruptcy filing, all 33 Rite Aid locations within New York City are scheduled to close by June 4, 2023. This closure will eliminate 526 union jobs, including 60 positions located in Manhattan alone. The closures raise concerns about community access to pharmacy services, as customers have previously relied on these locations for both medications and everyday needs.
A bankruptcy auction for the leases of Rite Aid’s New York locations is set to take place in July, following the solicitation of bids at a New Jersey courthouse next month. Rite Aid’s model has traditionally favored renting properties, and as a result, 20% of its 178 stores across New York State are leased properties situated within the five boroughs. Most Rite Aid outlets are concentrated in Brooklyn and Queens, where these boroughs alone host 25 stores, while three can be found in Manhattan.
Potential bidders for the leases may find opportunities in securing properties with below-market rents, a benefit of the existing lease agreements. However, it’s important to note that not all leases may be successfully transferred during the auction process, as landlords hold the right to deny bidders if their intended use of the space does not match the conditions set forth in the lease terms.
The firm A&G Real Estate Partners, based in Long Island, has been appointed to assist in marketing the properties available for auction. Several significant locations include:
- The East Village site at 81 First Ave., which has a lease expiring in January 2032, generating a gross annual rent of $627,000.
- The West Village location at 534 Hudson St. with a lease expiring in November 2029 and an annual rent of $953,000.
- A Washington Heights property at 4046 Broadway, leased through 2028, with an annual rent of $592,000.
Rite Aid’s financial decline has been pronounced, with the company reporting a net loss of $306.7 million in its first quarterly filings for fiscal year 2024. Key factors contributing to this downturn include a significant uptick in theft, particularly at urban locations in New York City. A reported increase of 64% in shoplifting incidents from mid-2019 to mid-2023 has further exacerbated Rite Aid’s revenue challenges, with losses attributed to theft amounting to $5 million compared to the previous year.
With inflation impacting consumer spending patterns, sales of non-essential items in Rite Aid stores have declined. Customers have expressed mixed feelings about the quality of services and products offered at their local Rite Aids leading up to the imminent closures, creating a sense of unease regarding future pharmacy access in their neighborhoods.
As Rite Aid navigates this challenging period, the competition it faces from other pharmacy chains remains a significant hurdle. With closures on the horizon, many customers are left questioning their options for pharmacy services in the wake of Rite Aid’s financial struggles.
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Additional Resources
- Crain’s New York: Three Manhattan Rite Aids Among 33 New York City to Be Auctioned
- Ev Grieve: Rite Aid Closing Its Remaining New York Locations
- AMNY: Rite Aid Closure Bankruptcy NYC Explainer
- Time Out: Every 24-Hour Pharmacy in NYC
- Crain’s New York: Annie Leibovitz Purchases West Village Duplex
- Wikipedia: Rite Aid
