Case Studies

Office Depot

Challenge

In 2009, Office Depot, an office supply retailer, retained DJM Realty, the predecessor to A&G Real Estate Partners, to close over 100 unprofitable stores. In 2013, Office Depot merged with OfficeMax, acquiring 823 stores, 600 of which were closed due to lease expirations and sales transfers that made closing sister stores with term necessary. Closed stores with term remaining went to A&G, with the challenge of mitigating the remaining leasehold liability on over 300 closed Office Depot/OfficeMax locations. We faced two primary challenges: leases had very little term remaining, and rents were higher than the current market.

Approach

A&G tapped its network of local brokers and like-sized retailers and embarked on a marketing program that resulted in numerous subleases and lease terminations. Where subleases or assignments were not possible, third-party deals were created, resulting in direct deals between tenants and landlords.

Results

These direct leases came about due to termination payments to the landlord by Office Depot based on pre-established assumptions and budgets. A&G worked closely with Office Depot and the local brokers to form these assumptions so that accounting could rely on them for expectations. Those assumptions and expectations are updated regularly. To date, A&G has maintained this partnership for over 10 years, mitigating millions of dollars in leasehold liability.