Walgreens and CVS are among the most popular replacement properties for tax-deferred exchanges — and for good reason.
A 1031 exchange — named after Section 1031 of the Internal Revenue Code — allows real estate investors to defer capital gains taxes when they sell an investment property and reinvest the proceeds into a "like-kind" replacement property. This powerful wealth-building tool has been used by investors for decades to grow portfolios, upgrade asset quality, and optimize cash flow without triggering an immediate tax event.
For 1031 exchange buyers, pharmacy properties check every box. CVS Health is a Fortune 5 company with investment-grade credit ratings (BBB), and Walgreens — now privately held by Sycamore Partners — remains one of the largest pharmacy operators in the U.S. with approximately 8,500 locations. These corporate-guaranteed leases provide the kind of tenant stability that exchange buyers need for long-term security. Their absolute triple-net lease structures mean zero landlord responsibilities — truly passive income. And with primary lease terms typically running 20–25 years, exchange buyers gain decades of predictable cash flow.
Beyond the financial fundamentals, pharmacy properties solve a practical challenge that every exchange buyer faces: finding a qualifying replacement property within tight IRS deadlines. Because pharmacy properties are among the most actively traded assets in the net lease market, Essential Net Lease maintains an extensive inventory of Walgreens, CVS, and Rite Aid properties — including off-market opportunities — ensuring exchange buyers always have qualified options available during their 45-day identification window.
Close on the sale of your current investment property. All proceeds go to a Qualified Intermediary (QI) — you never touch the funds.
You have 45 days to identify up to three replacement properties. We help you evaluate and select the strongest pharmacy properties available.
You must close on one or more of your identified replacement pharmacy properties within 180 days of the original sale.
Capital gains taxes are deferred. You can continue exchanging indefinitely, building a pharmacy property portfolio tax-free.
While both Walgreens and CVS offer exceptional net lease fundamentals, there are important differences exchange buyers should understand. Walgreens leases signed in the 1990s are typically double-net, while those signed in the 2000s or later are generally absolute NNN. CVS leases tend to carry slightly different renewal option structures and may include different provisions around roof and structural responsibilities. Additionally, Walgreens properties that were originally Rite Aid locations may carry assumed lease language that differs from corporate-originated leases.
These distinctions directly impact cap rates, long-term value, and financing terms. Essential Net Lease helps exchange buyers navigate these nuances so they make an informed decision — not just a fast one — during the time pressure of a 1031 exchange.
Peter Wenzler and the Essential Net Lease team specialize in helping 1031 exchange buyers identify and close on pharmacy replacement properties. With access to active Walgreens, CVS, and Rite Aid inventory across the country — including off-market and pre-market opportunities — we move quickly to help you meet your timeline. Our pharmacy-specific expertise in lease analysis, tenant credit evaluation, and store-level performance assessment ensures you select the right property, not just the most available one.
Whether you're exchanging out of a management-intensive apartment building, upgrading from a regional tenant to national pharmacy credit, or diversifying a concentrated portfolio into drugstore assets, we provide the expert guidance to make your exchange a success.
This information is provided for educational purposes only and does not constitute tax or legal advice. Consult with your tax advisor and attorney before pursuing a 1031 exchange.
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