Yellow Corp. wants to walk away from at least three dozen leased properties in the United States and Canada as the trucking company works its way through Chapter 11 bankruptcy proceedings.
Yellow is asking for bankruptcy court approval to abandon leases at its corporate headquarters in Nashville, Tennessee; a regional office tower in Overland Park, Kansas; and an assortment of truck terminals, offices, warehouse space and long-term parking for 18-wheeler trucks and trailers. In total, Yellow is seeking to reject leases at 37 properties, including four in Canada, with a lease rejection date effective as of Aug. 31.
The long-haul trucking company and its subsidiaries filed for bankruptcy in early August in the U.S. Bankruptcy Court for the District of Delaware after 94 years in business, citing financial stress from elevated debt levels. Yellow accumulated the debt through several acquisitions of rivals, including Roadway Express and the USFreightways subsidiaries USF Holland, USF Reddaway and New Penn Express.
Some of the proposed lease rejections include the abandonment of furniture, fixtures, IT equipment and other personal property to help Yellow reduce administrative costs once the bankruptcy case is closed, Yellow said in an Aug. 31 court filing.
Yellow and its primary legal counsel, Kirkland & Ellis, did not respond to requests for comment from CoStar News.
Separate from its leased real estate, Yellow owns about 170 properties in the U.S. and Canada that mostly comprise truck terminals. Yellow is planning to sell those properties at auction through the bankruptcy court to raise money to pay its creditors.
Old Dominion Freight Line, a trucking company based in Thomasville, North Carolina, bid $1.5 billion to acquire the portfolio. Judge Craig Goldblatt will decide next month whether to designate Old Dominion as the stalking horse bidder, setting the minimum price to acquire Yellow’s portfolio.
Jeff Diener, legal counsel to Old Dominion, declined to comment to CoStar News on Yellow’s proposed lease rejections.
Potential New Tenants
While it’s possible that some landlords will object to Yellow’s plan to walk away from leases, some property owners and managers may realize that they can find new tenants at higher rates, said Andy Gutman, president of Farbman Group, a brokerage in Southfield, Michigan.
“I think there will be a demand for those [properties] in good condition and they will not stay vacant for long,” Gutman told CoStar News. Gutman is not involved in the bankruptcy case but is familiar with Yellow's portfolio.
Yellow's proposed lease rejection list includes its former headquarters at 501 Commerce St. in Nashville. The high-profile mixed-use development known as Fifth + Broadway was bought by Northwood Investors for a record price last year. Northwood Investors did not respond to requests for comment.
Yellow’s regional headquarters at 10990 Roe Ave. in the Kansas City suburb of Overland Park is also on the lease rejection list. The 10-story building covering 343,000 square feet opened in 1978.
The remaining 35 properties where Yellow wants to reject its leases are spread across the U.S. and Canada and cover multiple property types. The lease rejections must be approved by the bankruptcy court, and Yellow can remove a lease or amend the rejection date on its proposed list up until that time. Some of the leased properties include:
- Offices at 2801 S. Kiwanis Ave. in Sioux Falls, South Dakota; 5200 W. 110th St. in Overland Park, Kansas; and 4800 Westown Parkway in West Des Moines, Iowa.
- Truck terminals at 7318 Fourth Ave. S in Seattle; 3122 Hilyard Ave. in Klamath Falls, Oregon; 841 MLK Jr. Way in Merced, California; 4055 Walker Road in Windsor, Ontario, Canada; 1344 White Court in Santa Maria, California; and 1800 Progress Way in Jeffersonville, Indiana.
- Warehouse space at 3085 U.S. Highway 93 South in Kalispell, Montana, and 3835 Copley Road in Akron, Ohio.
- Outdoor storage and truck parking at 862 W. Landstreet Road in Orlando, Florida.