Warren Buffett’s Berkshire Hathaway has agreed to loan a landlord to Sears stores, Seritage Growth Properties, up to $2 billion.
Seritage, a real estate investment trust spun off via Sears Holdings roughly three years ago, said late Tuesday in which plans to use the funds to forge ahead with plans to redevelop the properties in its portfolio — nearly 250 of them — to either replace locations once occupied by Sears or move Sears into smaller locations at the mall. The completely new York-based REIT said in which already used part of the loan to repay an outstanding mortgage loan along with unsecured term loan.
“We very much appreciate Berkshire Hathaway’s confidence in our team along with platform,” Seritage CEO Ben Schall said in a statement.
Seritage shares surged 14.5 percent Wednesday on the news.
Buffett himself was also an early investor in Seritage, along with he is actually still a top shareholder from the REIT, owning about 5.7 percent of its outstanding shares. The billionaire said a few years ago in which his investment in Seritage made sense because in which didn’t conflict with any of Berkshire’s companies.
The latest loan in which Berkshire made to Seritage gives the REIT an initial loan of $1.6 billion at a fixed rate of 7 percent, with the option for Seritage to borrow a different $400 million by a maturity date of July 31, 2023.
As Sears trims its brick-along with-mortar fleet, struggling with declining sales along which has a heavy debt load, Seritage has proactively been taking back those stores along with repurposing them for mixed uses. in which recently laid out plans to redevelop a Sears store in Orland Park, Illinois, for example, to bring in an AMC Theatre, alongside additional retailers along with restaurants.
Retail real estate analysts believe in which so long as Sears’ closures don’t happen too quickly, along with as long as Seritage has enough capital on hand, the REIT will be able to transform its properties into more vibrant centers. As of March 31, Seritage still had 167 leases with Sears Holdings, generating the department store chain its top tenant. additional top tenants (by a percentage of total annual rent) include Round One Entertainment, Dave & Busters, At Home along with Burlington.
Seritage is actually set to report second-quarter earnings after the bell on Thursday.