Home Depot is pondering a sale-leaseback of half of its 1,468 owned stores. The Atlanta-based chain currently owns 86 percent of its store real estate, and might partner with a large insurance company or bank on the deal. The transaction could total $29.7 billion, assuming 50 percent of Home Depot's owned stores and land are included, says Prudential Financial analyst Wayne Hood.
“While the transaction would enhance overall returns and return value to the shareholders, it would also increase rent expense, potentially reduce operating control of the locations and increase leverage on the balance sheet from the leases,” Hood says. Annually, the home improvement giant currently spends about $2.4 million per store on its 239 leased locations. Toys ‘R’ Us is said to be considering a similar sale-leaseback deal for the majority of its U.S. stores.