In a scenario that has become familiar as department stores look to downsize and monetize excess real estate, Sears Holdings has entered into a deal to sell four of its stores.
Washington Prime Group announced Monday plans to acquire the Sears locations along with their adjacent Sears Auto Centers for $28.5 million.
The transaction, which is expected to close during the second quarter, gives Sears the ability to lease the space back from the real estate investment trust at least for the time being. Under the terms of the deal, Sears will pay $1.25 million a year in rent plus applicable maintenance fees, taxes, insurance premiums and utility costs. Over the long term, Washington Prime is looking to redevelop the boxes.
“When Washington Prime Group is presented with the opportunity to improve a Tier One asset via retrofit of an underutilized department store space, it is imperative we act accordingly,” said CEO and director Lou Conforti. “As exhibited by our previous redevelopment successes, the aforementioned acquisition allows us to further our charter of creating hybrid town centers which capture both open air and enclosed retail space as well as assessing the viability for non-retail use.”
The properties are in premium locations in Longview, Texas; Columbus, Ohio; Sioux City, Iowa and Aurora, Colorado.
Once the transaction closes, Washington Prime will have the right to terminate the leases according to the specific terms of each lease—though not during the holiday period.
This latest development is just the most recent in Sears’ attempt to cut costs and capitalize on its intellectual and physical property. The ailing retailer, which is saddled with approximately $3.3 billion in debt, realized $1.25 billion in cost savings during fiscal year 2017. In January, the company announced 103 store closures, and in February, it announced plans to lay off 220 employees. Further, the retail group said it may sell its Kenmore and DieHard brands, as it did its Craftsman business.
Sears has relied heavily on loans from its CEO and chairman Edward Lampert’s ESL Investments fund but reports of deplorable store conditions and uneasy suppliers put the future of the retail entity in question.