Big Lots Signs $318 Million Sale-Leaseback Deal Involving 26 Stores

By Barbra Murray

Big Lots is converting some of its real estate into cash. The discount retailer has inked a deal to sell 26 of its stores and a California distribution center to Blue Owl Capital in a sale-leaseback agreement valued at $318 million. The transaction covers just a small percentage of the company’s shops. As of the beginning of 2023, Big Lots’ retail store portfolio totaled more than 1,400 locations across the country spanning 47.1 million square feet. With an average store size of roughly 33,300 square feet, the company will lease back a total of approximately 865,000 square feet, excluding the distribution center.

Big Lots, which had a less-than-stellar first quarter, plans to utilize the proceeds to pay down the synthetic lease on its distribution center and its revolving credit facility. In the current real estate market, sale-leaseback transactions can serve as an effective tool for quickly securing a substantial amount of money without disrupting operating activities. It can also prove an effective method for owner-operators to pursue if a loan on a property is due to reach its maturity date but paying it off or securing refinancing proves elusive. Such a move was obviously not a viable option for retailers like Bed Bath & Beyond and David’s Bridal, which both filed for bankruptcy protection in April 2023. But perhaps more sale-leaseback deals will come to the fore as certain segments of the retail industry continue to struggle (grocers are among those thriving in the retail sector).

Interest rates remain high, and lenders have tightened loan qualifications, so selling off owned assets and leasing them back may become an increasing occurrence in the retail world. However, it is unlikely that sale-leaseback deals will become a post-pandemic trend in some commercial real estate sectors, such as office. It’s all about the value of the asset. The sale-leaseback market hasn’t been quite as active as it had been in previous years, due in no small part to the dwindling value of the asset type in an environment of staggeringly high vacancies. But this deal shows that the real estate investment community is still interested in adding fully leased, single-tenant retail properties to their holdings.

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