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Sears Real Estate: How Sears Got This Property
Posted by: Todd Sullivan (IP Logged)
Date: December 24, 2013 11:10AM
Much has been written about SHLD and its CRE holdings. I like to boil things down to their most basic as less gets lost in the minutia. A reader sent this to me and after going through the math, it look sound. Remember when you read this that Sears in its entirety is now only worth $4.7B and remember this quote:
Quote:Where is GGP going to get growth from? We’ve already seem SPG spinning off assets to shareholders in order to fuel returns for them ( GGP did this when they spun off RSE ). GGP has spent the last couple years fixing operations post Chapter 11 but once this is done, where do they go for growth? New malls are not being developed and those who own good Class A Regional malls are not selling. Further, there is only so much existing structures can do to create shareholder value. The only legitimate place for them to go to acquire more CRE is SHLD . You’ll notice on last year’s 10K pg 18 of the 126 malls listed by GGP , Sears is an anchor in almost all of them (the 126 number includes JV interests of GGP).
It isn’t an outrageous proposition as the two already did this last year.
From a Reader (How Sears got this property):
Quote:Note, this ignores SHLD space in SPG malls of which Sears has a presence in ~130 of them. the above holds true for SPG . the easiest way for them to acquire more CRE to develop is to simply buy the Sears locations in their malls…
I think this is what Berkowitz was referring to when he spoke of Sears RE and said
The argument is then that kills the retail side of Sears. To the contrary I think it frees it. It frees its major brands Craftsmen, Kenmore and Diehard to be sold in every HD and LOW across the US. Those brands are already set up to license the products so to start this would involve minimal time and energy. Lands End ( LE ) is already in the process of being spun so that brand one can argue will do better outside of Sears vs trapped inside the retail operations of it.
In this scenario you have a huge capital infusion to Lampert/Berkowitz, a massive cost deleveraging and an asset light model with some of the most recognized brands in their prospective fields.
Stocks Discussed: GGP, SHLD, SPG, HD, LOW, LE,