The Bon-Ton Stores, Inc. has entered into an agreement for an $18.9 million sale-leaseback deal for its Herberger’s store building in Roseville, Minnesota. Proceeds from the transaction will be used to pay for outstanding debt.
Upon completion of the sale, the Milwaukee and York, Pennsylvania-based company will lease the property for a 20-year initial term with the option to extend the lease for four additional successive periods of five years at market rents.
“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, Bon-Ton’s president and chief executive officer said in a written statement.
“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.”
This sale-lease back deal could begin to help the struggling retailer; however, an August analyst report concluded that unlike Bon-Ton’s competitors, the company has a modest amount of real estate assets.
“At the end of 2016, Bon-Ton only owned 25 stores and one distribution center and had ground leases for another seven stores,” according to the report. “It also apparently had pledged 18 of those owned stores as collateral for its credit facility debt.”
Like many brick and mortar retailers, Bon-Ton has struggled in recent years to attract customers as consumers shift more of their spending online and spend less time in stores.
Long-term debt totaled nearly $850 million for the period ending July 29. The company reported a net loss of $33.2 million for the same period and a 6.1 percent drop in same store sales.
Bon-Ton is the parent company to Boston Store, Bon-Ton, Yonkers and Herberger’s. Bon-Ton perates 260 stores, which includes nine furniture galleries and four clearance centers, in 24 states
In September, Bon-Ton hired New York restructuring firm PJT Partners, to look at ways to refinance debt and prepare for a possible bankruptcy filing, according to the Wall Street Journal.
In late August, William Tracy took over as the company’s fourth CEO since 2012. Bon-Ton has also hired a new chief information officer and chief merchandising officer.
As of Thursday morning, Bon-Ton’s stock was trading at about 49 cents per share.
