Sears Holdings Corp Considers Creating REIT, Shares Skyrocket

Sears Holdings Corp Considers Creating REIT, Shares Skyrocket
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Sears Holdings Corp (NYSE:SHLD) said today that it is considering converting 200 to 300 stores into a real estate investment trust (REIT). The struggling retailer then would offer the REIT to shareholders in order to raise some much-needed cash.

Sears explores REIT creation

The company revealed its consideration in a regulatory filing this morning. According to Reuters, Sears wants to monetize part of its real estate holdings through a sales-leaseback deal. The department store chain would then give rights to buy equity interest, possibly through common shares, on a pro rata basis to its shareholders.

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Sears has been attempting to raise enough cash to keep it afloat, particularly heading into the holiday shopping season when it needs to keep plenty of inventory on hand. CEO Eddie Lampert and his hedge fund have been providing cash for some time. Together, the two own nearly half of Sears Holdings.

Sears tries to keep the doors open

For some time, Sears has been shutting down stores, reducing inventory and selling some of its assets so that it can stay in business. The retail chain’s margins and sales have been declining steadily for the last ten years. In the last nine consecutive quarters, Sears has reported losses. The company said for the quarter that ended on Nov. 1, it expects to post a net loss of between $590 million and $630 million. In the same quarter last year, Sears’ losses amounted to $497 million.

Last month Sears said it plans to raise at least $625 million through equity warrants and an unsecured loan. Previously, the department store chain said it planned to raise approximately $380 million by selling off some of its stake in Sears Canada by offering the rights. As of Nov. 6, Sears had raised approximately $300 million from that rights offering, which will close today.

The company also said it has sold one of its full-line stores in Cupertino, Calif. last month, gaining $103.5 million for the sale. Full-line stores are locations that are in malls and average about 135,000 square feet in size.

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