Private Equity Firm Reportedly Makes $2 Billion Bid for Kohl’s Real Estate

Kohl’s is reportedly in talks with another suitor, this time to discuss potentially selling its real-estate assets.

Private equity firm Oak Street Real Estate Capital LLC has reportedly made a bid to acquire around $2 billion worth of property from Kohl’s, Reuters reported on Friday. As per the report, Oak Street has offered between $1.5 billion and $2 billion for real-estate from Kohl’s. Under the deal, the firm would allow Kohl’s to lease back its stores.

FN has reached out to Kohl’s for a comment. Oak Street declined to comment.

The news comes on the heels of Kohl’s failing to complete a negotiation to sell itself a few months ago. After entering into exclusive negotiations in early June with Franchise Group to discuss a potential sale of its business, the Menomonee Falls, Wis.-based retailer said on July 1 that it withdrew from the process. The offer, initially priced at $69 per share, was downgraded to around $60 per share on June 6 and revised again to $53 per share on June 29.

Private-equity firm Sycamore Partners reportedly also dropped its initial $65 per share bid to a deal priced in the mid-$50s per share.

Despite the failed deal, Kohl’s said its board was still “open to any opportunities to maximize shareholder value.”

Like other department store retailers, Kohl’s has recently been subject to supply chain problems, inflation and inventory excesses facing the industry. As an added bonus, Kohl’s stores tend to occupy more than 70,000 square feet, making its underperforming stores even more problematic.

A June report from Morningstar analysts that analyzed Kohl’s properties found that the retailer could be hit with some store closures in the not-so-distant future as 10 of its property leases near expiration before fiscal year 2023. These properties total $328.2 million in allocated property balance. Morningstar also found that the highest concentration of lease rollover in the next decade will be in 2024, when 23 leases expire.

While the analysts said they do not predict “a slew of store closures in the short term” they outlined the potential risk for certain stores in underperforming locations like malls or stores with upcoming lease expirations.

“Unlike Macy’s and Nordstrom, which have been closing hundreds of underperforming stores over the past few years, Kohl’s large fleet of stores has remained relatively stable because the majority of its locations, roughly 95%, are outside of malls,” Morningstar analysts, led by VP Steven Jellinek, wrote in a note. “But that might change.”

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