Sears Holdings & General Growth Properties Form Real Estate Joint Venture

by Katie Lee

Hoffman Estates, Ill. — Sears Holdings Corporation and General Growth Properties, Inc. (GGP) have entered into a real estate joint venture (JV) under which Sears Holdings has contributed 12 Sears Holdings properties located at GGP malls, involving both existing Sears Holdings stores and certain property leased to third parties occupying former Sears Holdings stores.

As part of the transaction, GGP has contributed cash to the JV, and the JV has leased back the existing Sears Holdings stores. The transaction is designed to unlock real estate value and enhance financial flexibility for Sears Holdings while at the same time providing the JV the opportunity to create additional value through redevelopment and re-leasing of up to 50% of each property.

“We will continue to operate these 12 stores and there will be minimal impact on the day-to-day operations of our stores or the overall shopping experience for our members,” says Edward S. Lampert, chairman and CEO of Sears Holdings.

“Our new partnership with Sears Holdings is consistent with our investment strategy of acquiring interests in high-quality retail properties located in the U.S.,” says Sandeep Mathrani, CEO of General Growth Properties.

The transaction values these properties at $330 million in the aggregate. Under the agreement with Sears Holdings, a subsidiary of GGP has made a cash contribution of $165 million to the JV in exchange for a 50% interest in the JV, and such amount has been distributed to Sears Holdings which will own the other 50% interest upon consummation of the transaction. 

Sears Holdings plans to sell approximately 250 other Sears Holdings properties to Seritage Growth Properties (Seritage), a new real estate investment trust.

An affiliate of GGP will be the leasing manager and property manager for the properties.

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SOURCE: Sears Holdings Corporation; General Growth Properties

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