Coming to downtown Ann Arbor corner next to U-M's Diag: Walgreens?

The largest drugstore chain in the U.S. wants to open in a high-profile building on the corner of South State and North University in downtown Ann Arbor, city records show.

Farmington Hills-based Agree Realty Corp. submitted an application this week to Ann Arbor’s Historic District Commission to install Walgreens signs on the former Michigan Book & Supply building.

The two-story, 12,000-square-foot building on the edge of University of Michigan’s Central Campus has been vacant since Michigan Book & Supply closed earlier this year. The building also has a 6,000-square-foot basement that the bookstore used for textbook sales.

Texas-based Hogarth Management owns the building, but Ann Arbor’s First Martin Corporation manages the property.

“The former bookstore located at S. State St. and University is proposed to be renovated into a Walgreens store,” the application says.

“The existing building facade is to remain along with the interior structural elements. New signage is being proposed at this time,” it continues.

Representatives with First Martin Corp. and Walgreens could not be reached for comment, and a representative with Agree Realty declined to comment on the plans.

It appears that Agree Realty, which has an established landlord-tenant relationship with Walgreens stores nationwide, plans to purchase the building and lease to Walgreens. According to city records, a building sale has not yet been finalized.

First Martin's Bob Gates told AnnArbor.com in March that Hogarth had a "strong preference" to lease the entire South State building to a single, non-restaurant user.

The news — which comes a year and a half after CVS Pharmacy opened a store at 209-211 S State. St. — is particularly notable for one of downtown Ann Arbor’s most prominent buildings.

Located in the State Street Historic District, the building at 317 S. State St. was once occupied by discount variety store S.S. Kresge. Michigan Book & Supply’s lease began on July 1, 1989, and the store closed this year when its bankrupt parent company, Nebraska Book Co., filed for bankruptcy protection and closed 40 locations.

The building has an assessed value of $1,031,500, making its estimated market value about double that.

Based in Illinois, Walgreens is the largest drugstore chain in the country. As of Oct. 30, the company operated 7,944 drugstores in the U.S. and Puerto Rico, with plans to grow its store base by approximately 1.5 to 2.5 percent in fiscal 2013, according to its website. The average store size is 14,500 square feet.

Agree Realty has an established relationship with Walgreens — nationwide, its top three tenants are Walgreens, Kmart and CVS. As of Nov. 2, 32 percent of the company’s annualized base rent came from Walgreen Co., according to a quarterly filing with the U.S. Securities and Exchange Commission.

Agree controls the Ann Arbor property on the corner of Jackson and Maple roads where a Walgreens was constructed in 2010.

The company also owned the former Borders headquarters on Phoenix Drive and a portion of the former flagship Borders store downtown, but lost or sold those properties after Borders liquidated last year.

The move to open a Walgreens store just steps away from a CVS is not surprising in the highly competitive drugstore market. As competing national chains, the companies are constantly fighting for market share and often open stores close to one another.

CVS received city approvals in 2009 to proceed with an $8 million project that preserved the historic facade at 209-211 S. State St., but demolished two houses behind it. Located on two levels, the store is 13,040 square feet.

Ann Arbor’s Historic District Commission is expected to consider the request to install Walgreens signs on the South State Street building at its Nov. 15 meeting.

Lizzy Alfs is a business reporter for AnnArbor.com. Reach her at 734-623-2584 or email her at lizzyalfs@annarbor.com. Follow her on Twitter at http://twitter.com/lizzyalfs.