Pep Boys Closes $74M Sale Leaseback Deal
- Apr 14, 2008
Automotive retail and service chain Pep Boys has wrapped up its disposition of 23 properties in a deal valued at $74.3 million. The company’s retail operations will stay put, courtesy of lease agreements with the new owner.As per terms of the lease deals, Pep Boys will continue to occupy the stores for 15 years, with the option of renewing the agreement four times for a period of five years, each. The company will use proceeds from the sale, which is part of a larger disposition program, to pay down debt.The deal marks the third occasion that Pep Boys has closed a sale under the program. In November of last year, the company agreed to sell 34 properties for $166 million. And last month, a $63.6 million sale-leaseback deal involving 18 stores reached completion. Philadelphia-based Pep Boys operates 560 properties in 35 states and in Puerto Rico. Its SuperCenter stores typically feature 20,000 square feet of space, while its Express stores encompass an average of 9,700 square feet. All told, its portfolio includes over 12.8 million square feet of retail space and an additional 2.1 million square feet of warehouse space. Company stock opened today at $9; over the last 52 weeks, share prices ranged from $8.25 to $22.49Pep Boys is among a hoard of companies that are opting to sell and leaseback real estate assets to reduce debt, strengthen balance sheets, increase access to capital or retool corporate focus. Last week, SunTrust Bank closed the last phase of a $736 million deal in which Inland Real Estate Acquisitions Inc. purchased 433 properties totaling 2.2 million square feet. In March, Lone Star Funds, owner of Lone Star Steakhouse & Saloon restaurants, sold a portfolio of eateries to Sovereign Investment Co. in a $69 million transaction that allows Lone Star to continue to occupy the locales under a 15-year lease agreement. And in one of the larger such deals to take place in the last few months, Citigroup entered into an agreement last December to sell its 2.6 million-square-foot corporate banking headquarters on Greenwich Street in New York City to a joint venture involving SL Green Realty Corp. and CITQ for approximately $1.6 billion.