HOFFMAN ESTATES, Ill. and
INDIANAPOLIS, April 13, 2015 /PRNewswire/ -- Sears
Holdings Corporation (NASDAQ: SHLD) ("Sears Holdings") and Simon
Property Group, Inc. (NYSE: SPG) ("Simon") announced that they have
created a joint venture (the "JV") as part of Sears Holdings'
continued efforts to unlock the value of its extensive portfolio of
real estate holdings.
Sears Holdings has contributed 10 properties located at Simon
malls to the JV, including property leased to outside parties.
Sears Holdings will lease back from the JV and will continue to
operate existing Sears Holdings stores at the properties
contributed to the JV. Simon has contributed cash to the JV,
and the lease arrangements between Sears Holdings and the JV
provide the JV with the ability to create additional value through
re-developing the contributed properties and re-leasing space at
each property to third-party tenants.
"We are pleased to reach this agreement with Simon Property
Group, which is an important step in Sears Holdings' continued
transformation to a membership company, without the significant
asset intensity of its traditional retail business," said
Edward S. Lampert, Chairman and CEO
of Sears Holdings. "This transaction, taken together with our other
initiatives to create shareholder value through our vast real
estate portfolio, enhances Sears Holdings' financial flexibility to
invest in longer-term strategies such as our membership and
integrated retail platforms. Sears Holdings will continue to
operate these 10 stores and there will be minimal impact on their
day-to-day operations or the overall shopping experience for our
members."
David Simon, Chairman and CEO of
Simon Property Group, stated, "The creation of this joint venture
represents an exciting new chapter in our long and successful
relationship with Sears Holdings. This is a natural,
forward-thinking partnership that will also offer us the ability to
potentially redevelop certain locations that will create value for
our customers and investors."
Transaction Structure
The transaction values the
properties contributed to the JV at $228
million in total. In exchange for $114 million and a 50% interest in the JV, Sears
Holdings has contributed 10 of its properties located at Simon
malls to the JV. Simon contributed cash in the amount of
$114 million in exchange for its 50%
interest in the JV, which was then distributed to Sears Holdings in
accordance with the terms of the agreement between the
parties. In addition to the JV transaction, Simon has
separately agreed to acquire a Sears Holdings property at the La
Plaza Mall in McAllen, Texas.
Proposed Relationship with Seritage Growth
Properties
On April 1, 2015,
Seritage Growth Properties ("Seritage"), a real estate investment
trust formed by Sears Holdings, filed a registration statement on
Form S-11 with the Securities and Exchange Commission, providing
for a planned distribution of subscription rights to purchase
Seritage shares to Sears Holdings stockholders. Shortly following
the consummation of the rights offering, Sears Holdings expects
Seritage to purchase its 50% JV interest for a price equal to that
paid by Simon for its JV interest. Simon has also agreed to invest
about $33 million in Seritage common
shares through a private placement, at a purchase price equal to
the subscription price of the rights offering (subject to the
completion of the rights offering and other conditions).
Other Terms
The JV will lease back existing stores to
Sears Holdings under a triple-net master lease agreement (the
"Master Lease"), which has a ten year initial term and two
five-year renewal options. Sears Holdings expects to pay initial
base rent of $13.4 million under the
Master Lease.
Pursuant to the terms of the Master Lease, the JV is provided
the ability to re-capture a specified portion of the space leased
to Sears Holdings. Following such recapture, the JV will be
able to re-lease this space to other parties at potentially higher
rents. The recapture provisions and termination rights within the
Master Lease will enable Sears Holdings to continue its
transformation strategy into a more asset-light retailer with less
dependence on physical store locations, and will allow the JV to
create additional value through re-development.
Sears Holdings and Simon will have equal representation on the
executive committee that will govern the JV.
Forward-Looking Statements
Sears Holdings Corporation
This press release contains forward-looking statements, which
are based on the current beliefs and expectations of our management
and are subject to significant risks, assumptions and uncertainties
that may cause our actual results, performance or achievements to
be materially different from any future results, performance or
achievements expressed or implied by these forward-looking
statements. For a discussion of such risks, assumptions and
uncertainties, see "Risk Factors" and the forward-looking statement
disclosure contained in our most recent Annual Report on Form 10-K
and other filings filed with the Securities and Exchange
Commission. While we believe that our forecasts and assumptions are
reasonable, we caution that actual results may differ
materially. We intend the forward-looking statements to speak
only as of the time made and do not undertake to update or revise
them as more information becomes available, except as required by
law.
Simon Property Group
Certain statements made in this press release may be deemed
"forward‑looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Although Simon believes
the expectations reflected in any forward‑looking statements are
based on reasonable assumptions, Simon can give no assurance that
its expectations will be attained, and it is possible that actual
results may differ materially from those indicated by these
forward‑looking statements due to a variety of risks, uncertainties
and other factors. Such factors include, but are not limited to:
Simon's ability to meet debt service requirements, the availability
and terms of financing, changes in Simon's credit rating, changes
in market rates of interest and foreign exchange rates for foreign
currencies, changes in value of investments in foreign entities,
the ability to hedge interest rate and currency risk, risks
associated with the acquisition, development, expansion, leasing
and management of properties, general risks related to retail real
estate, the liquidity of real estate investments, environmental
liabilities, international, national, regional and local economic
conditions, changes in market rental rates, security breaches that
could compromise our information technology or infrastructure or
personally identifiable data of customers of our retail properties,
trends in the retail industry, relationships with anchor tenants,
the inability to collect rent due to the bankruptcy or insolvency
of tenants or otherwise, risks relating to joint venture
properties, costs of common area maintenance, and the intensely
competitive market environment in the retail industry, risks
related to international activities, insurance costs and coverage,
terrorist activities, changes in economic and market conditions,
the loss of key management personnel and maintenance of our status
as a real estate investment trust. Simon discusses these and other
risks and uncertainties under the heading "Risk Factors" in its
annual and quarterly reports filed with the SEC. Simon
undertakes no duty or obligation to update or revise these
forward‑looking statements, whether as a result of new information,
future developments, or otherwise unless required by law.
About Sears Holdings Corporation
Sears Holdings Corporation (NASDAQ: SHLD) is a leading
integrated retailer focused on seamlessly connecting the digital
and physical shopping experiences to serve our members - wherever,
whenever and however they want to shop. Sears Holdings is home to
Shop Your Way(R), a social shopping platform offering members
rewards for shopping at Sears and Kmart as well as with other
retail partners across categories important to them. The Company
operates through its subsidiaries, including Sears, Roebuck and Co.
and Kmart Corporation, with full-line and specialty retail stores
across the United States. For more
information, visit www.searsholdings.com.
About Simon Property Group
Simon is a global leader in retail real estate ownership,
management and development and a S&P100 company (Simon Property
Group, NYSE:SPG). Simon's industry-leading retail properties and
investments across North America,
Europe and Asia provide shopping experiences for millions
of consumers every day and generate billions in annual retail
sales. For more information, visit simon.com.
NEWS MEDIA CONTACTS:
Sears Holdings Public
Relations
(847) 286-8371
Simon Property Group
Tom Ward
(317) 685-7330
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SOURCE Sears Holdings Corporation