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Report On Business Sears Canada sells stake in 8 properties for $315-million

File photo of a Sears store in Toronto.

Frank Gunn/The Canadian Press

Sears Canada Inc. is selling its 50-per-cent joint venture interest in eight properties in a deal valued at about $315-million.

The half-interest Sears Canada owns in eight properties in Quebec with The Westcliff Group of Companies will be sold to Montez Income Properties Corp.

Westcliff will remain as 50-per-cent owner and manager of the assets.

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The Sears stores on the properties – four regional shopping centres, two strip centres and two open-format retail centres – will remain open, the company said Monday.

The move follows the decision last month by Sears Canada to sell the lease to its flagship store in the Toronto Eaton Centre and four other outlets for $400-million.

"As we have previously stated, unlocking the value of assets is a lever we use as a way to help create total value," Sears Canada president and chief executive officer Doug Campbell said.

"The joint venture assets we are selling to Montez impact neither our store operations nor our ability to serve customers. As such, our primary focus in creating long-term value remains on the basics of the business and continuing to become more relevant with Canadians coast to coast."

Desjardins Securities analyst Keith Howlett said in a research note Monday that he estimates after-tax proceeds of the asset sale to Montez in the $280-million range.

Mr. Howlett said he continues to expect Sears Canada to pay a special dividend of $4 to $5 before the end of the year from the proceeds of selling department-store leases back to landlords. But the additional proceeds from the Montez sale could push the dividend to as high as $6, he said.

"We expect Sears Canada to hold cash resources on its balance sheet in order to maintain the confidence of customers, suppliers and employees as to the company's ongoing commitment to retail operations," he said.

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But he added that the company is a speculative investment as it proceeds with a two-pronged strategy of "selling assets and disbursing cash to shareholders while simultaneously attempting to return its struggling and shrinking retail business to profitability.

"The probability of a return to profitability appears relatively low, in our view, given recent management turnover, underinvestment in the business over the last eight years and intensifyng competition."

Sears Canada has a network of 181 corporate stores, 246 hometown dealer stores and more than 1,400 catalogue merchandise pick-up locations among other assets.

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