Monday morning’s announcement that Sears Holdings Corp. (NASDAQ: SHLD) and Simon Property Group Inc. (NYSE: SPG) have created a joint venture (JV) to hold 10 Sears properties located at Simon malls is the struggling retailer’s latest attempt to figure out a way monetize its large real estate portfolio.

Under the agreement, Sears will lease back its stores from the JV and continue to operate them. An unspecified portion of the 10 properties that Sears contributed to the JV are leased to outside parties.

The properties are valued at $228 million, for which Sears received $114 million in cash and a 50% stake in the JV. Simon contributed the $114 million for its 50% share of the JV. Simon also completed a separate purchase of a Sears property in a mall in McAllen, Texas.

Simon has contributed an unspecified amount of cash to the venture, and according to the press release:

[T]he lease arrangements between Sears Holdings and the JV provide the JV with the ability to create additional value through re-developing the contributed properties and re-leasing space at each property to third-party tenants.

Sears Chairman and CEO Edward Lampert said:

We are pleased to reach this agreement with Simon Property Group, which is an important step in Sears Holdings’ continued transformation to a membership company, without the significant asset intensity of its traditional retail business.

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The Sears-owned REIT Seritage Growth Properties filed a Form S-11 with the U.S. Securities and Exchange Commission (SEC) on April 1:

[P]roviding for a planned distribution of subscription rights to purchase Seritage shares to Sears Holdings stockholders. Shortly following the consummation of the rights offering, Sears Holdings expects Seritage to purchase its 50% JV interest for a price equal to that paid by Simon for its JV interest. Simon has also agreed to invest about $33 million in Seritage common shares through a private placement, at a purchase price equal to the subscription price of the rights offering (subject to the completion of the rights offering and other conditions).

Under the leaseback agreement, Sears has a 10-year initial term and two five-year renewal options. Sears expects to pay initial base rent of $13.4 million under the triple-net master lease agreement.

Under the master lease agreement, the JV may recapture a specified portion of the space it has leased to Sears, after which the JV may lease the space to other parties for potentially higher rent.

Sears shares were inactive in Monday’s premarket, at $42.93 in a 52-week range of $22.45 to $48.25.

Simon Property Group stock was also inactive, having closed on Friday at $191.27, in a 52-week range of $156.97 to $206.31.

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