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Sears’ Selling Strategy

April 6, 2015

In recent news, Sears Holdings Corps has been selling a portion of its top properties to real-estate trust, Hoffman Estates, and then leasing them back. According to an article written by Angela Chen, published in the Wall Street Journal, this is “a financial step that will let shareholders including Chief Executive Edward S. Lampert buy valuable company real estate,” (Chen, Sears Moves to Raise $2.5 Billion By Selling Real Estate). The retailer for Hoffman Estates, has plans to raise over $2.5 billion from selling over 200 properties that are occupied by Sears and Kmart stores.

sears

This is a huge move in Sears’ commercial real estate because it will reassure suppliers that the value of Sears’ real estate is increasing significantly, regardless of the company’s recent deficits. According to Chen, “Analysts have considered that property to be a central source of value for Sears since the retailer was formed in 2005 through a merger with discount store chain Kmart,” (Chen, Sears Moves to Raise $2.5 Billion By Selling Real Estate).

Most recently, Sears has filed an offering by the Maryland-based trust company, Seritage Growl Properties, stating that Seritage will buy property from Sears and consequently lease is to the retailer. This way, the purchase will be funded by selling stakes to Sears shareholders. Since this recent news, an increasing amount of investors have been buying stocks from Sears. According to Chen, “Mr. Lampert, who along with his hedge fund ESL Investments Inc. owns nearly half of Sears’ stock, said he would buy his allotted stake,” (Chen, Sears Moves to Raise $2.5 Billion By Selling Real Estate).

In addition, Sears has agreed to partner with General Growth Properties Inc., one of the most well-known mall owners in the business. Sears has worked hand-in-hand with General Growth Properties to contribute 12 properties located at various General Growth malls in exchange for “half ownership of the joint venture and $165 million in cash,” (Chen, Sears Moves to Raise $2.5 Billion By Selling Real Estate). Eventually, it has been rumored that Sears will sell its stake in this partnership to Seritage.

Due in part to its recent losses, Sears Holdings Corps is on the rise to sell a majority of its properties, but we may see some turmoil mending along the way as its value in real estate increases significantly. For more information on Sears’ selling of real estate, check out Angela Chen’s article here.

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