Sears to Partner with General Growth Properties on Real-Estate Joint Venture

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.

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