Sears Holdings Corp. (SHLD) is exploring a Real Estate Investment Trust (REIT) for 200 to 300 of its owned properties through a rights offering to its shareholders, the company said in a regulatory filing Friday.
The news sent the company's stock up almost 42% to more than $46 per share in early morning trading.
It would be a step toward significantly monetizing a real estate portfolio estimated to have a book value of $5 billion. Sears said that it would specifically sell selected stores through a sale-leaseback transaction to a newly formed REIT, with Sears continuing to operate the locations under one or more "master" leases.
A potential wrinkle, however, in Sears pursuit of a REIT is that the tenant of a REIT, in this case Sears Holdings, typically needs to maintain a good credit rating.
The REIT option was made public as the Hoffman Estates, Ill.-based parent of the Sears and Kmart department store chains, commenced a rights offering for $625 million in 8% unsecured notes due 2019 and warrants to purchase shares of its common stock.
According to a source familiar with the situation, Sears was beginning to feel the effects of rising vendor concerns over the retailer's ability to pay for goods delivered, with the source attributing much of that concern to press reports on the state of Sears' near-term financial viability.
The rights offering may go a way toward helping alleviate vendors' concerns as well as improve shareholders position in the company's capital structure, Mary Ross Gilbert, managing director at investment bank Imperial Capital, previously told The Deal.