Dive Brief:

• Bed Bath & Beyond on Monday announced it has entered into an agreement to sell about 2.1 million square feet of its real estate portfolio to private equity firm Oak Street Real Estate Capital and lease back the space.

• The commercial spaces include retail stores, a distribution facility and office space, according to a company press release.

• The more than $250 million generated from the transaction will go toward investing in Bed Bath & Beyond's transformation efforts, funding share repurchasing or reducing outstanding debt, the company said.

Dive Insight:

The sale-leaseback transaction, which according to a Wall Street Journal report represents roughly half of its real estate, could help Bed Bath & Beyond shed some of its nearly $1.5 billion worth of long-term debt. 

"This marks the first step toward unlocking valuable capital in our business that can be put to work to amplify our plans to build a stronger, more efficient foundation to support revenue growth, financial stability and enhance shareholder value," CEO Mark Tritton said in a statement.

Tritton, who arrived at Bed Bath & Beyond from Target in November 2019, hasn't been slow to make changes at the distressed retailer. Bed Bath & Beyond in December 2019 announced six senior-level executives, including its chief merchandising officer, chief marketing officer and chief digital officer, were exiting the company. 

Bed Bath & Beyond, which operates some 1,500 stores, has been reviewing its assets for some time now. In July 2019, then-interim CEO Mary Winston announced a four-part turnaround plan, which involved reviewing its current assets and evaluating outside interest in "several" of its brands. A group of shareholders in April 2019 urged Bed Bath & Beyond to sell its underperforming assets, namely Cost Plus World Market, Personalization Mall and Christmas Tree Shops. 

In a note emailed to Retail Dive, Wedbush analyst Seth Basham estimated Bed Bath & Beyond's owned real estate could generate as much as $545 million in proceeds. "We view this sale as incrementally positive, as newly appointed CEO Mark Tritton follows through with asset sales the board previously announced were imminent, enabling the company to potentially use the proceeds for share repurchases," Basham said. "We would not be surprised to learn of additional transactions in the future, including the potential sale of non-core businesses such as Cost Plus World Market and Personalization Mall."

Sale-leaseback is a tactic other retailers, like Sears and Macy's, have considered in the past in order to get liquidity upfront. However, in exchange, the retailers are loaded with rent payments.

Bed Bath & Beyond said it is still working with outside financial advisers to evaluate its remaining real estate portfolio.