APPLE VALLEY – Big Lots, a discount furniture retailer, announced during the summer that they sold their Apple Valley Distribution Center, along with 26 store locations to Blue Owl Capital for $318 million.
The sale agreement allows Big Lots to lease the property from Blue Owl Capital – called a leaseback, to continue the distribution center’s operations.
A leaseback is a financial move that can help a company use money from the sale of the property for other things they need.
In Big Lots’ case, the company intends to use $100 million of the net proceeds from the sale and leaseback transaction to fully pay down its synthetic lease on the Apple Valley distribution center. A synthetic lease is a financial arrangement that allows Big Lots to lease a property while keeping it off its balance sheet, often for accounting and tax benefits.
The remainder of the net proceeds will pay down debt on its asset-based lending revolving credit facility.
“As we discussed on our Q1 earnings call, we are highly focused on ensuring we have plenty of liquidity to get through this period of macroeconomic challenges, and monetizing these assets is a significant step forward in ensuring such liquidity,” said Big Lots President and CEO Bruce Thorn.
The company’s stock went up 30% after posting their Q2 results with a better-than-expected loss.
Thorn said the company remains in a very challenging environment because their core lower-income customer remains under significant pressure and has limited capacity for higher-ticket purchases.