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Takeover of hardware chain means big real estate deals in works

The sale of a chain of hardware stores familiar to California residents could mean big changes on the commercial real estate landscape. Orchard Supply Hardware Stores Corp. filed for Chapter 11 bankruptcy a while back and has been looking for a buyer. The chain has now found one, and it's another name that is likely familiar to people in this part of the country: Lowe's, which along with Home Depot is one of the biggest and best-known hardware chains in America.

Lowe's has agreed to buy Orchard for $205 million. This includes 60 existing Orchard stores, many of which are in California. Lowe's will have the option to purchase the remaining 31 Orchard stores as part of the deal.

Lowe's already has more than 100 stores in California, so it would seem likely that not all of those 91 Orchard stores will stay open, at least in their current form. However, it could be that Lowe's will want to put the stores -- or at least their land -- that it does not decide to keep on the market.

The deal is for more than just real estate: Lowe's is also set to become the opening bidder in a sale of Orchard's assets. That means the company could inherit what might be a turnkey operation, at least in terms of inventory.

However, Lowe's will also be on the hook for payments that Orchard's vendors are owed. It might be that sales of some real estate could be used to pay these vendors and settle Orchard's debt.

Source: Charlotte Business Journal, "Lowe's to buy California hardware chain," Jen Wilson, June 17, 2013

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