Sears Holdings Corp. on Wednesday said it plans to raise more
than $2.5 billion by transferring properties to Seritage Growth
Properties, a Maryland-based trust that the struggling retailer
wants to turn into a real-estate investment fund.
Sears has filed its first set of IPO paperwork for the trust,
and agreed to partner with General Growth Properties Inc. on a real
estate joint venture.
The company is looking to sell subscription rights to buy a
to-be-determined amount of Seritage shares. Seritage would acquire
the 254 properties owned by Sears and then lease back the
properties.
Shares are up 3.9% to $43 in light premarket trading.
For the joint venture with GGP, Sears has contributed 12
properties located at the GGP malls in exchange for interest in the
joint-venture and $165 million in cash from the 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.
If the Seritage REIT 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.
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 would 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."
Write to Angela Chen at angela.chen@dowjones.com
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