Sears, Simon Properties form real estate venture

Sears Holdings (NYSE:SHLD) and Simon Property Group have created a joint venture as part of an effort to unlock the value of the retailer's extensive real estate holdings. Sears has contributed 10 properties located at Simon malls to the venture, which the retailer will lease back as it continues to operate the Sears Holdings properties that are part of the deal.

Simon has contributed cash to the venture, potentially giving added value to properties through redevelopment and re-leasing space at each property to third-party tenants.

"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," said Edward Lampert, chairman and CEO of Sears Holdings. "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 transaction values of the properties in the joint venture total $228 million. As part of the exchange, Sears will receive $114 million and 50 percent interest in the venture for its 10 properties. In an additional transaction, Simon has agreed to acquire a Sears property in the La Plaza Mall in McAllen, Texas.

Sears made a similar deal earlier this month with Seritage Growth Properties to buy and lease back about 254 Sears and Kmart stores. An additional 12 stores will be sold as part of a joint venture with General Growth Properties. In total, the REIT was set up to raise more than $2.5 billion in much needed cash for Sears.

News of a possible REIT broke last year and was then confirmed by Lampert in February when he announced Sears would sell up to 300 stores.

For more:
-See this Sears press release

Related stories:
Sears CFO rebuts negative implications of faster vendor payments
Sears' Lampert optimistic, moving forward with REIT
Sears considering REIT to raise more cash
Sears Canada CEO resigns
No bids in Sears Canada auction