Sears Canada to return two major Toronto-area stores to mall owners in $191-million deal

Department store Sears Canada Inc. will exit two more stores in Toronto after landlords made the retailer an offer it could not refuse for its prized leases in Canada’s red-hot retail real estate market — a whopping $191-million in cash.

The retailer, which has been shedding slow-moving merchandise categories and is open to selling back leases on less productive stores if the price is right, said it will leave its locations at Yorkdale Shopping Centre in Toronto and Square One Shopping Centre in Mississauga, Ont. by next March after striking a deal with co-owners Oxford Properties Group and AIMCorp. Of Alberta.

“Oxford contacted us and made a significant financial offer,� Calvin McDonald, chief executive of Sears Canada, said in an interview Friday. While the two stores were profitable, “they weren’t our highest performing stores, and their profitability didn’t compare to the offer that was made.�

In a torrid market for retail real estate, he added, “demand is exceeding supply, and as a result we were able to complete a transaction that was very favourable.�

The national department store chain, which will have 116 full-line department store locations after it exits the malls, could also receive up to an additional $54-million if the landlords exercise an option to have Sears withdraw from its location at Scarborough Town Centre within five years. That would include $1-million that Sears gets for the option.

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The company’s shares rose 11% to $10.52 in midday trading Friday.

Sears will offer employees at the stores continued employment within the Toronto area.

The move on Friday comes after Sears sold back leases for three high-profile stores in Vancouver, Calgary and Ottawa at malls owned by Cadillac Fairview in return for $170-million. It also sold back its stake in a Medicine Hat mall to the landlord for $43-million.

“In these particular stores we do have a big business in big-ticket [appliances and home goods] and in some of these malls, that is not the optimal trading model to have in a high fashion mall,� Mr. McDonald said,

The chief executive noted optimizing real estate is a continued focus for Sears, but said the company does not have an “official list of any stores that we are looking or planning to exit.�

OMERS and AIMCorp are among Canada’s largest institutional investors, each overseeing billions of dollars in assets on behalf of public sector clients in their respective provinces.

Article source: http://www.canada.com/Sears+Canada+return+major+Toronto+area+stores+mall+owners+million+deal/8526530/story.html