Sears Leveraging Investment Partnership To Raise Capital

By Christine Kern, contributing writer

Partnership with Simon Property aims to raise money to infuse into retail stores.

Sears Holdings and Simon Property Group, Inc. have announced a joint venture in an effort to unlock the value of Sears Holdings’ extensive portfolio of real estate holdings.

Sears will contribute 10 of its properties, valued at $228 million, in which it plans to then lease back to the joint venture. Simon has contributed $114 million to the deal. 

"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," Edward S. Lampert, Chairman and CEO of Sears Holdings, said in the press release.

"This transaction, taken together with our other initiatives to create shareholder value through our vast real estate portfolio, enhances Sears Holdings' financial flexibility to invest in longer-term strategies such as our membership and integrated retail platforms. Sears Holdings will continue to operate these 10 stores and there will be minimal impact on their day-to-day operations or the overall shopping experience for our members."

The joint venture is the latest move by the struggling retailer to cash in on the value of its real estate. Earlier this month, the struggling retailer crafted a deal along the same lines with General Growth Properties, Inc. in an effort to raise badly needed cash.

In its most recent earnings announcement, Sears said that it had lost $159 million during a holiday season when many of its competitors thrived. The retailer has made difficult decisions in the past year, including layoffs and store closings, in order to reconfigure and save the struggling chain.

David Simon, Chairman and CEO of Simon Property Group, stated, "The creation of this joint venture represents an exciting new chapter in our long and successful relationship with Sears Holdings.  This is a natural, forward-thinking partnership that will also offer us the ability to potentially redevelop certain locations that will create value for our customers and investors."