RCA in the News

Sears-GGP Deal Continues Sale/Leaseback Trend

CP Executive / April 7th, 2015

CP Executive reports: The sale-leaseback trend continues — in a very big way. Last Wednesday, Sears and General Growth Partnerships announced a sale-leaseback joint venture of 12 properties. In addition, a new 200-property REIT will also be created by Sears. The transfer of the 12 properties includes $165 million in cash coming from a GPP subsidiary. The triple-net master lease for the stores will run 10 years with two five-year renewal options. Seritage Growth Properties, the newly-formed REIT, will buy around 250 Sears Holdings properties.

Between both transactions, Sears Holdings will sell its half of the joint venture, with GGP kicking in an additional $33 million. This deal resulted from their new commitment to a more “asset-light” setup to better plan their strategic operations. “This deal fits part of a pattern. By our calculations, Sears Holdings has sold about $1 billion of assets in the last decade,” according to Senior Vice President Jim Costello of global commercial real estate data and analytics firm Real Capital Analytics (RCA).

Costello added that the top Sears Holdings asset purchasers have been GGP, Sand Hill Property Co., AmCap and Westfield America. GGP represented over 50 percent of the volume, “So the fact that they are reported to be doing this with GGP fits with what Sears Holdings has been doing before,” concluded Costello.

Some CRE professionals may recall similar events with the ill-fated Mervyn’s department store chain, which essentially lost their real estate due to heavily-increased rents for their stores. Annual sales of Sears have declined around 5 percent for half a decade, so their three major assets (Craftsman, Kenmore and their auto service unit) will continue to be pivotal in keeping them afloat.