Court Judgment Could Overthrow Bon-Ton Landlords’ $128 Million Deal to Buy Struggling Retailer From Insolvency
Credit: The Bon-Ton Stores,
Inc.The U.S. Bankruptcy Court might have simply derailed a last-minute proposal submitted over the previous weekend to obtain The Bon-Ton Stores Inc. (OTCQX: BONT) from bankruptcy for $128 million cash and keep the seller operating as a going issue.
A financier group composed of Washington Prime Group and Namdar Realty Group, which own shopping centers where the discount department store chain has shops, together with DW Partners and Namdar partner Mason Property Management, offered to buy The Bon-Ton Stores Inc. (OTCQX: BONT) from bankruptcy for $128 million cash in a bid to keep the seller as a going concern.
The financier group had conditioned its determination to continue with settlements on a deposit of $500,000 to cover the expense of due diligence.
Bankruptcy Judge Mary Walrath in the event today declined to permit the payment of the cost. In the ruling, the judge cited legal precedence against such moves. In addition, Walrath stated she was concerned that the “integrity of process is being upset” since the landlord-led investor group is only a possible bidder due to the contingency in its letter of intent, and not an actual bidder as the other groups of shareholders that have actually submitted quotes.
The having a hard time, Milwaukee-based outlet store chain applied for Chapter 11 insolvency reorganization this past February. The financier group, which includes 2 of Bon-Ton’s existing property owners, proposes to get Bon-Ton through an insolvency court-supervised sale process.
In this afternoon’s hearing, it was divulged that the 3 other groups that ahve submitted bids all require the liquidation of the company.
The next move in the case will come Monday April 16, when the court will hold the main auction for company.
In its letter of intent, the landlord-backed financier group proposed to acquire all of Bon Load’s possessions with one exception– a 743,600-square-foot distribution center at 115 Enterprise Pkwy in West Jefferson, OH (Columbus). That home would be sold independently to AM Retail Group Inc., which runs store places owned by G-III, consisting of Wilsons Leather, G.H. Bass & & Co., Calvin Klein Efficiency, Karl Lagerfeld Paris and DKNY shops.
Bon-Ton is a renter in 15 of Washington Prime Group’s residential or commercial properties, amounting to 1.48 million square feet. DW Partners is an alternative asset manager and Namdar Real estate Group is a privately held business real estate investment and management firm that owns and runs more than 30 million square feet of commercial realty in the United States Bon-Ton is an occupant in 13 of its residential or commercial properties.
Neither Washington Prime nor Namdar have commented yet on the deal.
Bon-Ton runs 250 stores, that includes 9 furniture galleries, in 23 states in the Northeast, Midwest and upper Fantastic Plains under the Bon-Ton, Bergner’s, Boston Store, Carson’s, Elder-Beerman, Herberger’s and Younkers brands.
This would not be the very first time landlords have actually teamed to buy up a distressed but major renter in their residential or commercial property portfolios.
In September 2016, Simon Home Group (NYSE: GGP), GGP (NYSE: GGP) and Genuine Brands Group LLC acquired Aeropostale Inc. through a bankruptcy court monitored sale for $80 million. Therefore far, that relocation seems to be working out for the REITS.
GGP cracked in $20.4 countless cash for its part. At the end of last year, GGP sold a 54% share of its interest in the joint venture to Genuine Brands Group LLC for $16.6 million, which resulted in a $12 million gain to GGP.
Namdar’s and Washington Prime’s bid makes sense for a few factors, inning accordance with Morgan Stanley Research study analysts Richard Hill and Ronald Kamdem.
If they were to lose Bon-Ton as a tenant, cap rates for their malls would likely broaden if given the threat of co-tenancy and capex requirements to redevelop.
It could also be somewhat of an offensive move. It is possible that the landlords might position Bon-Ton stores in shopping malls where they have a big box vacancy.
“We can’t help but believe this would be a competitive advantage for these two shopping mall property managers relative to their peers,” the two analysts said. “First, they might decide to keep open stores at their homes while closing others at competing places. Second, it could provide them an opportunity to purchase shopping centers from their rivals at more attractive appraisals if there is a danger of losing a major tenant.”