Strategic Capital in Action at Bed Bath & Beyond Plaza

Bed Bath & Beyond Plaza, located at 14805 Military Trail in Delray Beach, FL, is an 86,118-square-foot retail center with a proven track record of stability and performance. Built in 1981 and renovated in 2006, the property maintains a 98% occupancy rate across 20 tenants and boasts a weighted average lease term (WALT) of 8.7 years.

For RMR and our lending platform, Tremont Realty Capital, well-located retail centers with strong fundamentals often present opportunities to create long-term value – especially when markets shift.

In March 2022, Tremont partnered with the Borrower to refinance existing debt, fund capital improvements, and finance the development of a Starbucks outparcel. The loan also covered tenant improvement and leasing commission (TI/LC) costs tied to Bed Bath & Beyond’s (BBB) lease extension, which accounted for nearly 30% of the property’s gross leasable area (GLA). This strategic financing positioned the Borrower to modernize the property and unlock new revenue opportunities.

Adapting to market disruption

When Bed Bath & Beyond filed for Chapter 11 bankruptcy in April 2023, the property faced a significant income challenge. Rather than react defensively, the Borrower executed a proactive strategy that aligned with Tremont's confidence in the asset’s long-term viability. They negotiated an expedited vacancy agreement with BBB and immediately activated a tenant replacement plan.

The Borrower secured a 10-year lease with Michaels Stores at a starting base rent of $17/SF, NNN – representing a 64% increase over BBB’s prior rent. Delivering the Michaels space required a $1.5 million buildout. With $510,000 in reserves and an additional $250,000 equity contribution, the Borrower requested a $700,000 increase to the existing loan commitment.

Recognizing the opportunity to strengthen cash flow and asset value, the Tremont team approved the increase, demonstrating our ability to move quickly and support strategic repositioning that improved the property’s long-term performance while maintaining disciplined leverage.

Demonstrated results and value creation

Our decision to provide additional funding delivered measurable results:

• Revenue Growth: The Michaels lease, combined with a new 87-month lease for 10,000 SF with Humana at $17.50/SF, NNN, preserved 98% occupancy and boosted Underwritten Net Cash Flow (UWNCF) to $1.3M, with projections of $1.5M at loan maturity.

• Enhanced Valuation: “As-Is” and “As-Complete” appraisals exceeded initial underwriting by $2.8M and $1.0M, respectively, supporting a projected valuation of $27.6M at maturity (60% LTV).

• Risk Mitigation: The Borrower’s swift tenant transition minimized vacancy risk and maintained income diversification, while our conservative leverage ensured stability amid market uncertainty.

Strategic lending insights

This transaction underscores our ability to identify and capitalize on strategic opportunities:

• Proactive Support: By approving a $700,000 commitment increase, we enabled the Borrower to complete the Michaels buildout without overextending financially.

• Aligned Partnership: The Borrower’s equity contributions – $270,000 over 12 months, plus $250,000 for the buildout – reinforced their commitment to long-term asset performance.

• Adaptive Structuring: We modified loan terms, including a $7,000 adjustment fee and a $1,750 exit fee increase, ensuring the structure reflected enhanced asset value while preserving flexibility.

A model of success

By collaborating closely with the Borrower, we helped reposition the property for sustained success – driving cash flow, increasing valuation and mitigating risk. Our approach reinforces the value of proactive lending strategies and positions us as a trusted partner for institutional investors seeking long-term, data-driven results.

Learn more about Tremont Realty Capital.