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Bon-Ton Announces $18.9 Million Sale-Leaseback Deal

Retailers are looking for as many ways as possible to unlock value from their physical store fleets.

Department store chain The Bon-Ton Stores today announced it has reached a deal with an undisclosed buyer for the sale and leaseback of its Herberger’s location in Roseville, Minnesota, for $18.9 million.

The transaction will allow the retailer to pay down some outstanding debt. It will also allow Bon-Ton to lease the property for 20 years with the ability to extend the terms for four more five-year periods at market rent.

“We are pleased to announce this transaction as we continue to pursue the opportunities available to us within our real estate portfolio to better position the business for the future,” William Tracy, president and chief executive officer, commented. “This sale-leaseback transaction unlocks additional capital, enabling us to repay debt and enhances our overall liquidity position. We remain focused on executing our strategic initiatives to drive enhanced performance.”

Recent rumors indicate that debt issues may be coming to a head for the retailer. The Wall Street Journal reported the company has secured PJT Partners to help it restructure its business—potentially through a bankruptcy filing—in the face of $900 million of debt.

The Bon-Ton’s position is a familiar one for too many apparel retailers today. As part of its North Star Strategy, Macy’s is continuing to explore selling off excess floors in some stores and redeveloping locations entirely to incorporate more profitable businesses. The company has already sold its downtown Minneapolis property for a reported $59 million and expects to close on the sale of additional floors in its downtown Seattle location.

Ailing Hudson’s Bay Company remains under pressure from activist investors who want the retailer to recognize that the value of the company isn’t in retail, it’s in real estate. Land & Buildings Investment Management, which owns about 4.3% of the company’s stock, is pushing for a sale of the Saks Fifth Avenue flagship in New York, redevelopment of that space or for HBC to exit retail outside of Canada altogether. In response, late last month Reuters revealed HBC is planning to hire a financial advisor to review all options.

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