Sears, Simon Property form joint venture
Hoffman Estates, Ill. – In its latest move to capitalize on the value of its real estate and raise more cash, Sears Holdings Corp. has formed a joint venture with Simon Property Group whereby Simon will take ownership of 10 Sears stores in Simon malls and lease them back to Sears, who will continue operating Sears stores in the venture. The stores include properties Sears has leased to other entities. Earlier this month, Sears announced a similar deal with General Growth Properties Inc.
Simon has contributed cash to the joint venture, and the lease arrangements between Sears Holdings and the joint venture provide the joint venture with the ability to create additional value through re-developing the contributed properties and re-leasing space at each property to third-party tenants.
The transaction values the properties contributed to the joint venture at $228 million in total. In exchange for $114 million and a 50% interest in the joint venture, Sears Holdings has contributed 10 of its properties located at Simon malls. Simon contributed cash in the amount of $114 million in exchange for its 50% interest, which was then distributed to Sears Holdings. In addition to the joint venture transaction, Simon has separately agreed to acquire a Sears Holdings property at the La Plaza Mall in McAllen, Texas.
Sears Holdings and Simon will have equal representation on the executive committee that will govern the joint venture.
“We are pleased to reach this agreement with Simon Property Group, which is an important step in Sears Holdings' continued transformation to a membership company, without the significant asset intensity of its traditional retail business," said Edward S. Lampert, chairman and CEO of Sears Holdings. "This transaction, taken together with our other initiatives to create shareholder value through our vast real estate portfolio, enhances Sears Holdings' financial flexibility to invest in longer-term strategies such as our membership and integrated retail platforms.”