Oak Street funds target Walgreens

A Chicago private equity firm has acquired a handful of Walgreens drug stores throughout the Gulf Coast since the beginning of the year, property records indicate.

Oak Street Real Estate Capital LLC has spent nearly $30 million to purchase the five stand-alone drug stores from Walgreen Co., the nation’s second-largest pharmacy chain.

The stores acquired beginning in January are located in Lee, Manatee, Pasco and Pinellas counties, according to county records.

A pair of Oak Street funds, WBA Portfolio Owner NLP Galaxy LLC and WBA Portfolio Owner Fund V Galaxy LLC, spent an average $5.96 million on each of the stores.

Walgreen, a subsidiary of Britain’s Walgreen Boots Alliance, opened the locations beginning in 2001, records indicate. It’s expected that Walgreens will continue to occupy each of the new Oak Street Real Estate properties via sale-leaseback agreements.

Officials from Oak Street Real Estate, an investment firm formed in 2009 primarily to buy net-leased commercial real estate, did not return an email inquiry for comment on the Walgreen transactions.

In all, Oak Street Real Estate has some $7 billion in assets under management through a series of individual funds.

The company’s push comes as so-called net-lease investments — in which credit tenants such as Walgreens pay rent and expenses ranging from utilities to taxes — have gained in popularity.

Single-tenant stores operated by healthcare-related entities, such as Walgreen, CVS and others, have been considered particularly strong assets amid the COVID-19 pandemic by institutional and individual investors alike.

For Walgreen Boots Alliance, the sales allow the company to realize a profit on its real estate investments while shedding expenses that don’t relate directly to its core business.

In December, Oak Street announced that New York-based Goldman Sachs Asset Management’s Petershill program acquired a “minority stake” in the firm, one that would allow it “to accelerate the growth of its funds, the development of its technology and sourcing capabilities, and the expansion into adjacent markets.”

“Oak Street was founded on the principle that monthly cash flow from investment grade tenants should be the foundation of a diversified investment portfolio,” Oak Street Real Estate Co-Founder and CFO Jim Hennessey says, in a statement.

“For the past decade we have delivered on our commitment to this principle and have experienced exponential growth as a result,” Hennessey adds. “This partnership (with Goldman Sachs) will allow us to dramatically expand our capabilities in core areas and harness additional expertise that will drive value for our investors.”

The recent Walgreens purchases weren’t the first by Oak Street Real Estate along the Gulf Coast, either. Pinellas County property records show a company fund bought a Walgreens store there last August.