Chicago firm buying billions in real estate from retailers on the brink

Oak Street Capital’s plan involves leasing back the properties

TRD NATIONAL /
Apr.April 10, 2020 12:00 PM
An illustration of Oak Street Capital’s Marc Zahr

An illustration of Oak Street Capital’s Marc Zahr

With every crisis comes opportunity. Private equity firm Oak Street Real Estate Capital has $5 billion and plenty of opportunities.

Marc Zahr and co-founder Jim Hennessy are telling companies in distress to sell them their property and lease it back, according to a report from Crain’s. The firm recently struck a $725 million deal in Ohio with Big Lots. The deal allows the retailer to pay down debt, and Oak Street gains control over four distribution centers, which will be leased by Big Lots, according to Crain’s.

Oak Street has completed or is finalizing deals with seven publicly-traded companies to buy roughly $1 billion of real estate and subsequently rent it back to the companies, Zahr said. With additional financing, Oak Street plans to scoop up about $3 billion worth of property, Crain’s reported.

Still, there’s risk on Oak Street’s end: the leases are typically for 15 to 20 years, and there’s a good chance the companies can’t survive a recession.

In January, Oak Street bought 2.1 millions square feet of space from struggling retailer Bed Bath & Beyond. It leased it back to the company. Some retailers have resisted such real estate plays: Target fought off an attempt in 2008, for instance. The retailers need the underwriting to allow them flexibility to maneuver through uncertain times.

Oak Street is backed by major public pension funds like the Illinois Municipal Retirement Fund and the Chicago teacher’s fund. It’s on track to close its fifth fund with a cap of $2.5 billion, according to Crain’s. [Crain’s] James Kleimann

 

Related Articles

arrow_forward_ios
Jeff Bezos (Getty, iStock)

“We are erring on the side of having too much capacity”: Amazon reports massive Q3

“We are erring on the side of having too much capacity”: Amazon reports massive Q3
Simon Property Group’s David Simon and Brookfield’s Ric Clark (Getty, iStock)

Simon and Brookfield finalize terms of J.C. Penney buy

Simon and Brookfield finalize terms of J.C. Penney buy
The MTA board approved rent relief for small businesses in Grand Central and other locations (iStock)

MTA cuts rent up to 90% for small businesses

MTA cuts rent up to 90% for small businesses
In a report, The Center for an Urban Future asked over twenty city leaders and experts how to make survival, and potentially even success, viable. (Getty)

Five solutions to save restaurants this winter

Five solutions to save restaurants this winter
J.C. Penney CEO Jill Soltau and Aurelius Capital Management CEO Dirk Markus (Getty; Wikipedia Commons)

J.C. Penney creditors want slow down “bad faith” sale

J.C. Penney creditors want slow down “bad faith” sale
518 Broadway (Google Maps)

Four years vacant: Landlord offers dire outlook for Soho building

Four years vacant: Landlord offers dire outlook for Soho building
Renderings of Target at Cross County Center in Yonkers and Target CEO Brian Cornell (Photos via Marx Realty; Getty)

Target to open in Yonkers

Target to open in Yonkers
Bed Bath & Beyond at 620 6th Avenue and CEO Mark Tritton (Google Maps; Getty; iStock)

Bed Bath & Beyond will renovate, not close, Chelsea store

Bed Bath & Beyond will renovate, not close, Chelsea store
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...