Sears (NASDAQ:SHLD) is reportedly exercising its right to terminate the leases on 19 unprofitable stores. The closures were announced in an SEC filing by Seritage Growth Properties, the real estate investment trust spun off from the retailer. Shares of Sears rose about 2.2 percent to $9.94 in early afternoon trading on the news.
Sears sold off 235 Sears and Kmart branded stores to Seritage in July 2015. The transaction generated a big payday, raising about $2.7 billion. Sears has continued to operate many of the stores through a leaseback arrangement.
The stores slated for closure represent 1.9 million square feet of space available for leasing and accounts for $5.9 million in rent. Sears will continue paying rent to Seritage until it exits the space in April. The company will also pay a termination fee of one year of the aggregate base rent, plus one year of estimated annual operating expenses.
This is the second time Sears has closed some of the stores held by Seritage. In September, the department store chain terminated the leases on 17 unprofitable stores, which accounted for $5.8 million in rent. The company also closed 64 Kmart stores in mid-December. It was previously reported the company would shutter 30 Sears and Kmart stores in early 2017.
Sears recently announced that it had entered into a $500 million committed secured loan facility that will mature in July 2020. The loan is secured by mortgages on 46 properties owned by the company’s subsidiaries. Roughly $321 million was funded under the loan facility as of Wednesday. Up to an additional $179 million may be drawn in the future, but the funds must be secured by additional properties. The loan bears an 8 percent rate.
Sears has relied on store closings and funding from CEO Eddie Lampert in its attempt to return to profitability. Last month, Sears’ disclosed that it had obtained a standby letter of credit facility from affiliates of Lampert’s hedge fund, ESL Investments. Sears jumped 10 percent on Dec. 29, the day the letter of credit was disclosed. Sears shares have rallied as much as 20 percent in the last five days.