Sears to Partner with General Growth Properties on Real-Estate JV--2nd Update

By Angela Chen 

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 of Sears, up 25% over the past three months, rose 3.9% to $42.99 in 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.

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 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."

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