Sears leans on real estate values again to generate cash

SHARE Sears leans on real estate values again to generate cash
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A worker repairs a sign outside the Sears Grand store in Solon, Ohio. | AP file

NEW YORK — Sears announced its second deal this month intended to extract value from its sizeable real estate holdings as the retailer struggles to offset falling sales.

Hoffman Estate-based Sears will contribute 10 properties valued at $228 million to a joint venture with the mall operator Simon Property Group Inc. and will take a 50 percent interest in the business. Sears will lease back the stores which it will continue to operate, it said Monday.

Simon will contribute $114 million to the joint venture.

Sears is rebuilding a war chest by selling off assets, cutting down inventories and closing stores. It closed about 234 underperforming Kmart and Sears stores last year and generated about $2.3 billion in liquidity.

The maneuvers give Sears Chairman and CEO Edward Lampert and other major shareholders some breathing room to continue operations and snap up company assets after the retailer recorded its fourth straight year of falling profit and revenue in 2014.

Sears announced a joint venture similar to Monday’s deal with Chicago’s General Growth Properties Inc. less than two weeks ago. That agreement included 12 properties and was valued at $330 million.

“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,” Lampert, in a printed statement.

Sears, based in Hoffman Estates, Illinois, is also planning to sell about 254 properties to a real estate investment trust that it is creating, Seritage Growth Properties. The properties involved in that transaction are mostly Sears and Kmart stores. Sears anticipates more than $2.5 billion in proceeds from the sale.

Sears owned or leased 1,725 Sears and Kmart stores combined as of Jan. 31.

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