HOFFMAN ESTATES, IL–Sears Holdings CEO Edward Lampert is taking aggressive steps to stave off bankruptcy for the retailer by advocating for the sale of some of the company's prime business units to the hedge fund that he runs, ESL Investments. As part of the deal he is also seeking to sell more of the retailer's real estate holdings in what would be a sale leaseback transaction.
ESL is proposing that Sears sell all or part of the Kenmore brand and related assets, as well as the Sears Home Improvement business and the PartsDirect business of the Sears Home Services division. It would acquire the latter two based on an enterprise value of $500 million. “In our view, pursuing these divestitures now will demonstrate the value of Sears' portfolio of assets, will provide an important source of liquidity to Sears and could avoid any deterioration in the value of such assets,” ESL said in a letter to Sears' board of directors.
As for the real estate, ESL said it was willing to make an offer for certain real estate owned by the company, including the assumption of $1.2 billion in debt obligations secured by those properties, with the expectation of entering into an ongoing master lease for some or all of the stores to allow for their continued operation.
Sears has been struggling to better compete for quite some time — indeed ESL noted that the company had been seeking a buyer for the assets it proposes to buy for at least two years. As part of its efforts to stay a going concern it has closed a number of Sears and Kmart retail operations already. In 2015 it spun off Seritage Growth Properties, which has performed very well with its strategy of leasing up or repositioning Sears stores.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
