Sears Holdings insists its planned real estate investment trust will benefit shareholders, contrary to charges in a lawsuit that was filed late Friday in a Delaware Chancery Court.
The lawsuit by a shareholder, which is claiming class-action status, was filed against Sears, its chairman Edward Lampert and Seritage — the REIT that was established by Sears, among others. Earlier this year, Sears said it would transfer 254 of its top store sites to Seritage, which it said would generate $2.5 billion in proceeds to Sears Holdings. Sears would still operate the stores at the sites transferred to the REIT, except that instead of owning the stores Sears will now be a renter. The first year of rental payments is about $150 million, which Sears would pay to Seritage.
The lawsuit charged that the properties are worth more than the $2.5 billion Sears is expected to receive, and that the transaction would really benefit Lampert. Specifically, the concern is that Sears Holdings would be left with underperforming properties, and a diminishing number of good assets to provide options to buffer its lackluster balance sheet as it possibly heads down the road to a bankruptcy, the lawsuit said.
According to a Sears spokesman, “The complaint contains numerous factual misstatements and is legally without merit. The company plans to contest it vigorously and believes the proposed REIT transaction will provide substantial benefits to Sears Holdings and its shareholders.”
The lawsuit is seeking to stop the transfer of the real estate to Seritage, which is expected to close by the end of this month.
The Chicago Tribune first reported on the lawsuit Monday afternoon.