The Bon-Ton Stores Inc. announced Monday that it has entered into an $84 million sale-leaseback agreement with CPA:17-Global, a non-traded real estate investment trust operated by W.P. Carey Inc.
The transaction includes six properties, according to a news release. W.P. Carey Inc. is a leading net-lease REIT that provides long-term sale-leaseback and build-to-suit financing solutions for companies worldwide, Bon-Ton said.
Proceeds from the transaction, supplemented with borrowings under the company’s revolving credit facility, will be used to pay one of two of the company’s mortgage loan facilities due in April 2016, Bon-Ton said. Each mortgage loan facility has principal outstanding of approximately $105 million and consists of 12 properties, the company noted.
Upon completion of the sale, Bon-Ton will lease the six properties for a 20-year initial term with the option to extend the term for three additional successive periods of 10 years, Bon-Ton said. The first year annualized rent associated with the six properties is expected to be approximately $6.9 million, the effect of which will be largely mitigated through reduced interest expense as a result of the termination of the mortgage facility, it noted. Additionally, in conjunction with that termination, the company will pay $4.7 million to satisfy the make-whole provision within the mortgage facility agreement.
“We are very pleased to announce this significant transaction with CPA:17-Global and look forward to a continued successful partnership with them,” said Bon-Ton President and CEO Kathryn Bufano. “The sale-leaseback of these six properties allows us to address the maturity of one of our mortgage facilities and further enhances our financial flexibility through the value of the remaining properties no longer encumbered by the mortgage facility.”
Gino Sabatini, head of net lease investments for W.P. Carey, said, “We are pleased to expand our relationship with Bon-Ton with the inclusion of these properties in CPA:17-Global’s portfolio and the provision of sale-leaseback financing to fund the repayment of a portion of their existing mortgage facilities. As significant long-term assets for Bon-Ton, they are an attractive income generating addition to our portfolio, with the transaction providing a ‘win-win’ solution for both Bon-Ton and CPA:17-Global.”
Bon-Ton, which has headquarters in Springettsbury Township and Milwaukee, operates 270 stores, including nine furniture galleries and four clearance centers, in 26 states in the Northeast, Midwest and upper Great Plains under the Bon-Ton, Bergner’s, Boston Store, Carson’s, Elder-Beerman, Herberger’s and Younkers nameplates.