Two Mall Owners Offer to Save Bon-Ton with Buyout

Bon-Ton is on the verge of closing all its’ department stores after filing for bankruptcy. The cost to buyout? $128 Million.

bon-ton buyout

Namdar Realty Group and Washington Prime Group have come together to offer the $128 million cash bid to buy Bon-Ton Stores out of bankruptcy.

Bon-Ton filed for Chapter 11 bankruptcy in February 2018. The bidders are looking to purchase Bon-Ton through a court-supervised bankruptcy sale process. Following Bon-Ton’s actions to file bankruptcy, several entities have been interested in buying out Bon-Ton and liquidating the stores. The investor group and Bon-Ton are preparing to finalize their asset purchase agreement which needs to happen before the auction currently scheduled for April 16, 2018.

The courts also approved the $500,000 work fee paid by the investor group, in order to cover the due diligence cost.

No comment has yet been made by either Washington Prime or Namdar Realty.

The details of the buyout

Namdar Realty and Washington Prime would acquire nearly all of Bon-Ton’s assets. There is one exception, a 743,600 sq. ft. distribution center located at 115 Enterprise Parkway, West Jefferson, OH. AM Retail Group Inc. would buy this exception property separately.

Bon-Ton is currently Washington Prime’s tenant in 15 properties. The size of these properties totaling 1.48 million square feet. In addition, Bon-Ton is also a tenant of Namdar Realty in 13 properties.

There are 250 stores operated by Bon-Ton in 23 states across the United States.

 

According to Morgan Stanley Research analysts, Ronald Kamdem and Richard Hill, Washington Prime and Namdar Realty’s bid makes complete sense due to several reasons. If the investors were to lose their tenant, Bon-Ton, their malls’ cap rates would most likely widen if given the risk of co-tenancy and capex requirements to redevelop.

 

 

In addition, the investors could be positioning the move in order to place the Bon-Ton stores where they have big box vacancies in their malls.

 

“We can’t help but think this would be a competitive advantage for these two mall landlords relative to their peers,” said the two analysts. “First, they could choose to keep open stores at their properties while closing others at competing locations. Second, it could provide them an opportunity to buy malls from their competitors at more attractive valuations if there is a risk of losing a major tenant.”