Sears Holdings Forms Joint Venture For Nine Properties

Sears Holdings Corp. has entered into a joint venture with The Macerich Co., a real estate investment trust and mall operator, that will transfer ownership of nine locations the retailer operates, the companies have announced. Under terms of the deal, the nine stores, located in malls Macerich operates, will fall under the joint venture and Sears Holdings will lease back space for its operations.

Some of the space Sears Holdings currently operates can be leased to third parties under terms of the arrangement. Macerich is contributing $150 million in cash to the joint venture, which has been distributed to Sears Holdings, the companies reported. Total purchase price for the nine properties is $300 million, so Sears Holdings retains a half-interest in the joint venture. Initial base rent for the nine stores under a master lease will be approximately $14.8 million, the companies stated.

Sears Holdings has been entering into joint venture agreements with owners of properties where its stores operate since forming a real estate investment trust dubbed Seritage just weeks ago. Sears Holdings expects Seritage to purchase its 50% joint venture interest for a price equal to that paid by Macerich for its interest, the companies maintained, adding that, through its interest in in Seritage, Sears Holdings have equal representation on the executive committee with Macerich that will govern the joint venture.

In announcing the latest deal, Edward Lampert, Sears Holdings chairman and CEO, said, “We are pleased to be in a position to unlock substantial value for Sears Holdings shareholders and further facilitate the company’s transformation. Through these transactions, we have additional capital to invest in our membership and integrated retail platforms. We will continue to operate these nine stores and there will be minimal impact on their day-to-day operations or the overall shopping experience for our members.”

Arthur Coppola, Macerich chairman and CEO said, “This new joint venture with Sears Holdings is in line with our overall strategy of reinvesting capital into our portfolio of proven, highly profitable locations. The nine properties being contributed to the joint venture are located at centers with average in-line sales of $680 per square foot and include some of our top centers including Washington Square, Los Cerritos Center, Arrowhead Towne Center, Vintage Faire Mall, Danbury Fair Mall, Chandler Fashion Center, Freehold Raceway, Deptford Mall and South Plains Mall. Through ongoing space optimization, we expect this transaction to create significant value for shoppers, tenants and shareholders alike.”