KBRA Credit Profile Releases Research ? Staples Looks to Acquire Office Depot/OfficeMax Consumer Unit?Implications for CMBS

KBRA Credit Profile (KCP), a division of KBRA Analytics, releases a special report on CMBS exposure to The ODP Corporation, which owns Office Depot and OfficeMax, in light of a June 2021 acquisition offer from USR Parent, Inc., the parent company of Staples. USR Parent, Inc. made a $1 billion cash offer to acquire ODP's consumer business, including Office Depot/OfficeMax retail stores, websites, and intellectual property.

KCP examined our $725 billion coverage universe of over 1,100 CMBS transactions and identified 78 properties collateralizing 74 loans?$4.3 billion by allocated loan amount?across 173 CMBS transactions with exposure to an Office Depot or OfficeMax retail location. KCP observed significant exposure to near-term ODP lease expirations?52 properties securing $1.3 billion in CMBS debt have an ODP location with a lease expiration in 2021 or 2022.

Rival office supplies retailers Staples and ODP have experienced declining annual revenue and operating income in recent years because of decreasing demand for office supplies and increased competition?a trend that has been exacerbated by the COVID-19 pandemic. Staples has attempted to merge with ODP on several occasions, but previously proposed transactions failed to materialize because of antitrust concerns. At the time of its most recent bid for ODP's consumer business lines, USR Parent, Inc., indicated it was confident in its ability to obtain antitrust approvals and close on a transaction in conjunction with its June 2021 acquisition offer. Regardless of the proposed acquisition's outcome, store closures in saturated markets appear inevitable because the retailers have shuttered relatively few stores despite their operational woes, and they have significant overlap in the markets in which they operate.

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