Kohl’s Bidder Looks to Sell Real Estate, Mortgage Applications Fall
Kohl’s Bidder Looks to Sell Real Estate
If Kohl’s is sold for a reported $8 billion to its current lead suitor, Franchise Group Inc., the struggling retailer could end up lighter on real estate.
Kohl’s and Franchise Group, which owns chains including The Vitamin Shoppe and Pet Supplies Plus, announced this week they have entered into exclusive negotiations on Franchise Group’s offer to buy Kohl’s and its more than 1,100 stores for $60 per share in cash.
Delaware, Ohio-based Franchise Group said in a statement it intends to contribute $1 billion in capital to the transaction, to be funded through increases in its existing secured debt facilities. It would pay for the deal primarily through sales of Kohl’s real estate assets, though it does not specify which properties would be sold.
Franchise Group said it anticipates free cash flow and earnings “would significantly increase” after a purchase of Kohl’s, though it also notes there is no assurance that talks, slated to span up to three weeks, will result in any transaction.
Kohl’s and Franchise Group were not commenting during negotiations. The Wall Street Journal reported Wednesday that Menomonee Falls, Wisconsin-based Kohl’s as of January owned 410 locations, leased 517 and had ground leases on another 238 stores, most of which are in strip retail centers.
Mortgage Applications Decline
Rising interest rates helped push mortgage applications to their lowest level in more than two decades, a prominent banking trade group reported Wednesday.
The Mortgage Bankers Association said loan application volume for the week ended June 3 declined 6.5% from the prior week. Refinancing applications were down 17% from the prior week and 75% below the corresponding week of 2021, while new-purchase applications were down 7% from the prior week and down 21% from the year-earlier period.
“While rates were still lower than they were four weeks ago, they remain high enough to still suppress refinance activity,” Joel Kan, the Washington, D.C.-based trade group’s vice president of economic and industry forecasting, said in a statement.
Barriers to single-family home purchases have generally raised demand for rental units in many cities, and Kan noted that higher rates and worsening affordability challenges have been hard on first-time buyers. “The purchase market has suffered from persistently low housing inventory and the jump in mortgage rates over the past months,” he said.
Kan noted the trade group’s application index, which measures shifts in activity but does not specify numbers of applications, reached its lowest level in 22 years, even when adjusting for the Memorial Day holiday. As of June 3, the 30-year fixed mortgage rate had increased to 5.4% after three consecutive weekly declines.