Shares of Educational Development Corporation (NASDAQ: EDUC) are experiencing a notable increase in pre-market session today, up 8.96% to $2.19 as of the latest check. This uptick in the stock price follows the announcement of a significant leasing agreement, which is poised to bolster the company’s financial outlook.
EDUC Entered Strategic Real Estate Transaction
The Hilti Complex, Educational Development Corporation’s headquarters and distribution center in Tulsa, Oklahoma, was sold to Partner Holdings in accordance with the terms of a commercial real estate contract signed on September 19, 2024.
This property has an agreed-upon sale price of $38,250,000, less fees, commissions, and closing expenses. Notably, the arrangement creates a distinct Triple-Net Lease for the area held by EDUC and assigns the purchase the existing Hilti lease.
Enhancing Financial Stability
The decision to divest the Hilti Complex aligns with the company’s strategy to reduce debt, which is anticipated to benefit shareholders significantly. The savings on interest from decreased borrowings are projected to surpass the company’s monthly rental obligations, leading to a substantial enhancement in financial performance.
Moreover, EDUC is poised for an improvement in cash flow, bolstered by a recent leasing agreement for nearly half of its space and expectations of converting excess inventory into liquid assets in the coming years.
Details of the Lease Agreement
The Hilti Complex is made up of many buildings that together offer 34 acres and 402,000 square feet of lettable office and warehouse space. Approximately 183,800 square feet is currently leased to Hilti under a 15-year contract, which will transfer to the buyer upon closing.
The company will enter into a new lease for the remaining 218,200 square feet, along with retaining a lease/sub-lease of approximately 110,000 square feet with Crusoe Energy System for a five-year term. Under the terms of the lease, the buyer has 75 days for due diligence, commencing from the contract date, with the closing expected 30 days thereafter.
The lease will feature a 15-year term at an initial rate of $8.52 per square foot, including annual escalations and triple-net terms. This strategic maneuver EDUC for enhanced operational efficiency and financial resilience moving forward.
