QVC Sells Headquarters, Studio and Distribution Centers for $443 Million to Oak Street

 By Linda Moss CoStar News

Home shopping giant QVC has sold five properties, including its headquarters and main studio facility, for $443 million to Oak Street, a private equity firm that's made several similar acquisitions from retailers facing a tough economy.

QVC in a third-quarter earning release reported that it had sold sites in Pennsylvania, South Carolina, Tennessee and Virginia to Chicago-based Oak Street, which is owned by Blue Owl Capital of New York. QVC, which operates a video TV channel and also sells goods online, plans to lease those properties back.

The location in Pennsylvania that traded was QVC Studio Park, the company's 585,000-square-foot global headquarters and studios, at 1200 Wilson Drive in West Chester, CoStar data shows. That facility is located on a 48-acre campus, according to CoStar.

The other sites that CoStar identified as being sold to Oak Street were: 2200 TV Road, a 1.1 million-square-foot distribution center in Florence, South Carolina; 1 QVC Drive, a 1 million-square-foot distribution center in Suffolk, Virginia; and 857 Mountain View Drive, a 1 million-square-foot distribution center in Piney Flats, Tennessee.

QVC and Englewood, Colorado-based Qurate Retail, which owns both the No. 1 home channel and St. Petersburg, Florida-based HSN, didn't immediately respond to emails seeking comment Monday. Blue Owl declined to comment on behalf of Oak Street.

Oak Street has been involved in several sale-leaseback deals with struggling retailers that were looking to raise capital by cashing in their real estate holdings after facing a troubled economy. In December 2019, beleaguered home goods chain Bed Bath & Beyond sold roughly half its real estate portfolio, some 2.1 million square feet that included its Union, New Jersey, headquarters and some stores, to Oak Street for $267.3 million in such a transaction.

Oak Street has also done sale-leasebacks with Delaware, Ohio-based Franchise Group, whose $8 billion offer to acquire retailer Kohl's chain was rejected in July. Franchise Group in November last year purchased the Badcock furniture chain for roughly $580 million. The next month, Franchise Group said it would repay $400 million of debt with the proceeds from the sale of Badcock's consumer-credit accounts receivable portfolio. Then it put Badcock's owned stores, headquarters and distribution centers on the block.

In March it completed the sale-leaseback of 35 Badcock stores for $94 million to National Retail Properties, saying it would use the cash proceeds to repay part of the remaining $175 million of its acquisition financing for the chain. Then in June, Badcock closed a sale-leaseback deal for three Badcock distribution centers, with Oak Street buying them for about $150 million.

There were several media reports that Franchise Group planned to finance its planned acquisition of Kohl's by doing a sale-leaseback deal with Oak Street for the retailer's real estate.

For the third quarter QVC reported that it posted a $277 million gain on its property sales in the third quarter, and will use the those proceeds to pay down its revolving credit facility.

"We do have several additional material properties," Ben Oren, Qurate executive vice president and treasurer, told Wall Street analysts on the earnings call. "I think the interest in doing additional sale-leasebacks will be opportunistic and dependent on market conditions, but we will continue to look at opportunities across the portfolio."

North Carolina Fire

Qurate, and QVC and HSN, are still reeling from last year's North Carolina warehouse fire, where an employee died. That 1.3-million-square-foot fulfillment center at 100 QVC Blvd. in Rocky Mount, which served both QVC and HSN, was destroyed by a blaze last December.

That facility won't be rebuilt by Qurate, and nearly 2,000 workers were let go as a result. In the aftermath of the fire, Qurate said that facility was the company’s second-largest fulfillment center, processing 25% to 30% of the volume for both its QVC and HSN businesses. And it was the primary returns center for hard goods for the networks.

"While the company has taken steps to minimize the overall impact to its business, it experienced elevated warehouse and logistics costs during the three months ended Sept. 30, and anticipates these increased warehouse and logistics costs to continue during 2022," Qurate said in a statement.

QVC received an additional $180 million in insurance proceeds stemming from the fire in the third quarter. In total, QVC has received $380 million of insurance money since December 2021 and recorded a net gain of $137 million in restructuring and fire-related costs during the first nine months of this year.

In the third quarter, QVC also incurred an additional $2 million in fire-related costs, net, primarily related to personnel costs and legal fees, that are not expected to be reimbursed by the company's insurance policies, as well as $12 million of other fire-related costs that it expects to receover from insurance.

In addition, QVC submitted a business-interruption claim with its insurer.

"QVC expects to continue to record additional costs and recoveries until the insurance claim is fully settled," according to Qurate.

Overall revenue for QVC and HSN combined dipped 8% in the third quarter, dropping to $1.66 billion.

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