Staples gave campus worth $150 million to Sycamore for free
It will now pay at least $131 million in rent for the building
Sycamore Partners can add another $150 million to the amount it has extracted from the office supply giant Staples Inc. since taking it private in 2017.
After taking some $1.3 billion in dividends earlier this year, the private equity firm has gotten its hands on another of Staples’s assets: its 650,000-square-foot headquarters in the Boston suburbs.
In a private earnings release to its lenders Monday, Staples said it distributed its headquarters, valued at $150 million, to a Sycamore affiliate, according to a copy of the document seen by Bloomberg. The company entered into a 10-year agreement to lease the property back “at market rent.”
Sycamore had disclosed plans to take over the Staples campus in Framingham, Massachusetts, at the time of a massive $5.4 billion refinancing in April that funded the dividend payout.
Some information about the expected rent payments was included in two footnotes of the 400-page offering memorandum the company distributed at the time, according to a copy of that document seen by Bloomberg. But the exact terms of the lease and a final valuation of the building were revealed to investors only this week, the people familiar with the matter said.
Staples didn’t receive any cash from the sale-and-leaseback transaction and will be required to make minimum lease payments of $131 million over the course of the lease, the new document shows.
The building was the last major piece of real estate the company owned, Chief Financial Officer Jeffrey Hall said in response to questions during a conference call with analysts on Wednesday.
Staples’s revenue was up 1.8% to $2.61 billion in its first fiscal quarter compared to a year prior, while adjusted earnings before interest, tax, depreciation and amortization were up 6.7% to $238 million, the people familiar said. Leverage stood at 5.9 times, Hall said on the call.
Representatives for Sycamore and Staples declined to comment.
Sycamore took one of the largest debt-funded dividends in recent memory through the April refinancing at Staples, in a deal that amazed even Wall Street veterans. After that deal, the private equity firm had recovered roughly 80% of the cash it originally put up to take Staples private.