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Sears aims to raise $2.5 with REIT


Sears Holding Corp. is looking to raise more than $2.5 billion by selling its stores to a real estate investment trust.

The REIT, called Seritage Growth Properties, will purchase 254 Sears and Kmart stores for more than $2.5 billion and then lease back the Sears and Kmart stores to Sears Holdings. Seritage will partially fund the transaction through a public rights offering.

"Today's announcement demonstrates our ability to unlock a small portion of Sears Holdings' vast and valuable real estate portfolio, and represents an important step in the continued transformation of Sears Holdings," said Edward S. Lampert, chairman and CEO of Sears Holdings. "We continue to show that Sears Holdings is an asset-rich enterprise with multiple levers to generate financial flexibility, while creating shareholder value. The JV and its structure are consistent with our transition from a store-focused network to a more asset-light, member-centric retailer and it provides additional capital to invest in the future of our membership and integrated retail platforms. Importantly, we will continue to operate these 12 stores and there will be minimal impact on the day-to-day operations of our stores or the overall shopping experience for our members."

Sears previously announced it was exploring forming an REIT for this purpose to help raise capital. Sears said it reserves the right to modify or abandon REIT plans at any time before they go through.

Sandeep Mathrani, CEO of General Growth Properties, said: "Our new partnership with Sears Holdings is consistent with our investment strategy of acquiring interests in high-quality retail properties located in the U.S. This transaction provides an opportunity to potentially redevelop certain Sears Holdings locations within our portfolio and further strengthen each mall within its trade area. We look forward to working with Sears Holdings to maximize the value of these locations for our shareholders."

In addition, Sears entered into a joint venture with General Growth Properties Inc. involving 12 Sears properties located in GGP malls.

Sears and GGP will each own 50% of the joint venture, valued at $330 million, with Sears receiving a $165 million payment from GGP. The properties include both Sears stores and stores Sears is leasing to other retailers. The venture is leasing back the stores to Sears, who will continue to run the Sears stores.

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