Big Lots Inks $725M Industrial Sale-Leaseback Deal

20 Rausch Creek Road, Tremont, Pa. Image via Google Street View

Big Lots Inc. has just announced plans to sell its owned real estate portfolio of four distribution centers in a sale-leaseback transaction with Oak Street Real Estate Capital LLC. The discount retailer has agreed to close on the disposition of the properties, which total approximately 7.5 million square feet in four states, in a transaction valued at $725 million.

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Big Lots opened the distribution centers between 1989 and 2004. The largest of the group is the 3.5 million-square-foot facility at 300 Phillipi Road in Columbus, Ohio. The site had also been home to the company’s corporate headquarters until it relocated to a new office destination in Columbus in 2018. Big Lots will also sell 2855 Selma Highway in Montgomery, Ala., a 1.4 million-square-foot property. And rounding out the group are 20 Rausch Creek Road in Tremont, Pa., and 2306 Enterprise Drive in Durant, Okla., both of which total approximately 1.3 million square feet.

2306 Enterprise Drive, Durant, Okla. Image via Google Street View

Upon completion of the sale-leaseback transactions, Big Lots will walk away with net proceeds totaling roughly $550 million. The company will utilize a portion of the funds to fully pay down debt on its $700 million revolving credit facility, under which it had $229.2 million in outstanding borrowings as of February 1, 2020. The remaining proceeds will be set aside as additional liquidity and for other corporate purposes upon the normalization of market conditions.

Big Lots will continue to occupy the distribution centers under long-term, absolute net leases with Oak Street. The four sale-leaseback transactions are on schedule to close during the retailer’s fiscal second quarter of 2020. In November 2019, the company completed the sale of a fifth distribution center, a 1.5 million-square-foot warehouse in Southern California’s Inland Empire, in a $191 million deal.

Pulling back from property ownership

Many leading players in the retail industry are keen on sale-leaseback transactions as part of asset-light strategies designed to increase liquidity. Major deals this year include Bed Bath & Beyond Inc. pocketing of $250 million on the sale-leaseback of a 2.1 million-square-foot portfolio of retail, distribution and office space in a transaction with Oak Street in January.