Sears Holdings stock up 31% after it plans a REIT

Stock in Sears Holdings Corp, parent of Sears Canada, closedup 31 per cent Friday after a filing in which it suggested it may roll 200 to 300 of its properties into a REIT.

The troubled retailer has been trying to raise cash to fund holiday sales and help in its restructuring efforts.

• Sears Canada stake sold off by U.S. parent
• Sears stock down again on reports of halted vendor shipments

A real estate investment trust or REIT would allow the company to tap the value of its enormous U.S. real estate portfolio, which includes both Sears and KMart properties.

It has already squeezed cash out of its Canadian real estate, selling off high-profile stores and its regional mall holdings and raising $340 millionin cash by selling offSears Canada.

It also sold off Lands End in an effort to raise cash.

Sears CEO Eddie Lampert, who controls 48.5 per cent of Sears Holdings stock, has spun off assets to himself and his hedge fund.

Eddie Lampert keen on cash

But critics see his strategy as having very little to do with restructuring the retailer and everything to do with cashing in on its real estate.

Essentially whats happening is theyre trying to take cash away from this asset and EddieLamperthas been trying to take cash away from Sears since he bought it- Mark Satov of Satov Consultants

A REIT spinoff will reduce the margin of safety for creditors in the event the company doesnt turn around.

After reports earlier this year that some creditors might not deliver goods in time for the holiday, Sears said it has has plenty of assets to cover its obligations to its creditors and vendors.

We believe we have financial flexibility, particularly as we enter the holiday season, and we expect it will provide confidence to our vendors and other constituents that we can generate the liquidity needed to invest in our business, spokesman Chris Brathwaite said.

Sears doesnt report third quarter earnings until early December, but the filing makes it clear it is still bleeding cash.

Sears forecast its earnings before interest, taxes, depreciation and amortization would come in at a loss of at least $275 million for the quarter.

Sales continue to decline or be flat at existing stores. The department store chain has lost out sales to more nimble competitors over the last five years.

Retail consultant Mark Satov sees the REIT move as one more sign of the inevitable demise of Sears.

I dont see any future for Sears as they havent invested in the brand for years, he said in an interview with CBCs The Exchange with Amanda Lang.

Lampert has been taking money out of the retailer for six or seven years and this is another way of doing it, Satov said.

Essentially whats happening is theyre trying to take cash away from this asset and Eddie Lampert has been trying to take cash away from Sears since he bought it, he said.