Sears Canada will return up to 3 major Toronto-area locations to mall owners

TORONTO – Sears Canada Inc. (TSX:SCC) could receive as much as $242 million for vacating up to three stores in major Toronto-area shopping centres — the latest example of the venerable retailer’s efforts to adapt to current market trends.

The national department store operator says it will receive $191 million cash for vacating its locations at Yorkdale Shopping Centre in Toronto and Square One Shopping Centre in Mississauga, Ont. by next March.

It 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.

Sears Canada, which has been refocusing its business amid intense and growing competitive pressure in Canada’s retail sector, said it will offer employees at the stores continued employment within the Toronto area.

“The possible release of select assets is an initiative we have previously proposed as a way to create total value for the company,” Calvin McDonald, Sears Canada’s president and CEO, said in a statement Friday.

“In this case, we were presented with an opportunity that gives us a significant financial benefit without changing our plans to improve the business and make Sears more relevant to Canadians.”

Square One, Yorkdale and Scarborough Town Centre are regional malls in strategic locations in western, central and eastern parts of the Greater Toronto Area.

The properties are co-owned by Oxford Properties Group, the real estate arm of the Ontario Municipal Employment Retirement System, and the Alberta Investment Management Corp., also known as AIMCorp.

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.

Sears agreed last year to sell back leases for three high-profile stores in Vancouver, Calgary and Ottawa at malls owned by Cadillac Fairview in return for $170 million.

Those three Cadillac Fairview malls as well as Sherway Gardens in Toronto will become homes for Nordstrom, a U.S. retailer based in Seattle that is set to make its first move into Canada in the coming years.

Sears Canada, which is a publicly traded company controlled by U.S. retailing company Sears Holdings Corp. (Nasdaq:SHLD), offers numerous services and merchandise across Canada through 181 corporate stores, 248 hometown stores, and through 1,400 catalogue and online pickup locations.