People walk past a Vancouver Sears location in this 2011 file photo.Andy Clark/Reuters
Sears Holdings Corp. is forming a real estate investment trust to acquire about 254 of the retailer's properties and the new company will probably use a rights offering to finance the purchase.
Proceeds from the property sale are expected to exceed $2.5-billion, Sears said in a statement Wednesday. The REIT, Seritage Growth Properties, would lease the Sears and Kmart properties back to the retailer. Seritage, based in Maryland, plans to use debt and other credit to finance the acquisition.
Sears is trying to squeeze more value out of its real estate holdings by leasing space to other retailers and developing properties. The shares surged 31 per cent, the most ever under chief executive officer Eddie Lampert, after Sears announced plans to sell stores to a spinoff REIT in November.
Sears will also form a separate $330-million venture with General Growth Properties Inc. and contribute 12 properties at the landlord's malls as part of the deal, it said in a separate statement. General Growth will make a cash contribution of $165-million to the venture.
"Sears Holdings is an asset-rich enterprise with multiple levers to generate financial flexibility, while creating shareholder value," Lampert said in the joint-venture statement.
The rights offering by Seritage is expected to close by the end of the second quarter, Sears said.