By Angela Chen
Sears Holdings Corp. has agreed to partner with General Growth
Properties Inc. on a real estate joint venture in the latest move
for the struggling retailer, who has been trying to downsize.
Shares are up 3.9% to $43 in light premarket trading.
Sears has contributed 12 properties located in GGP malls in
exchange for a stake in the joint venture and $165 million in cash
from the real-estate investment trust. Sears will continue to
operate the 12 stores, which are valued at $330 million.
The deal is expected to "enhance financial flexibility" for
Sears and give GGP the opportunity to redevelop and re-lease up to
50% of each property, the companies said.
Sears has been doing poorly lately and working to dismantle its
stores. It posted a loss of $159 million over the holidays as
revenue plunged 24% to $8.1 billion. In plans to split off as many
as 300 of its best stores into a separate company by June.
Sears previously said it plans to raise more than $2 billion by
selling off 200 to 300 stores into a real-estate investment trust
by May or June. Sears will then rent those stores back from the
REIT.
Sears Chief Executive Edward Lampert said that the joint venture
is "an important step in the continued transformation" of the
company from a store-focused network to a "more asset-light,
member-centric retailer." This echoed comments he made in February,
when he emphasized a focus on profit instead of sales growth and
the need to transform from " a series of brick-and-mortar locations
that sell products into an integrated retailer that builds
relationships with our members."
Sears plans to sell about 250 other properties to the Seritage
Growth Properties--a Maryland-based REIT owned by the company--and
will distribute rights to acquire Seritage shares to Sears
stockholders. If this is completed, Sears will eventually sell its
50% stake in the joint-venture to Seritage. Accordingly, GGP has
invested $33 million to acquire Seritage shares as well.
Write to Angela Chen at angela.chen@dowjones.com
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