Sears Holdings Ponders Forming A Real Estate Trust, Selling Stores To It

Two things are true about Sears Holdings: the company owns a lot of stores, and those stores are not selling enough merchandise. In order to raise some cash, in the last year the company has spun off its best quality clothing brand, sold shares in its Canadian subsidiary, borrowed money from its CEO, and taken on some roommates. What’s next? Selling some of its stores and leasing them back.

This is a time-honored method for institutions in need of cash and saddled with a lot of real estate. What’s unique about Sears is how much real estate they have: initially, the company wants to take 200 to 300 stores and sell them, but not to an existing real estate company. It wants to create its own real estate investment trust and sell shares to that.

An REIT is exactly what it sounds like: a real estate portfolio that sells shares of itself to investors. How much cash are we talking about here? Reuters reports that Sears recently sold its Cupertino, California store for $102.5 million. Reuters does not point out that the JCPenney in that mall also sold its store to the same developer, and that both of the sold stores will close soon. Why so much money for hundreds of thousands of square feet at a mostly-dead mall? It happens to be literally across the road from a massive new campus of offices and iPhone-sorcery labs that Apple is building in its hometown of Cupertino.

Sears Holdings explores creation of REIT to raise cash [Reuters]

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