Sears (SHLD) says it's actively exploring the idea of turning 200 - 300 of its stores into a Real Estate Investment Trust or REIT. As is the case with everything Sears does lately, the goal would be raising liquidity for the dwindling asset that is Sears' core retail business. They outlined the move on the company blog.

Does this make any sense? It depends on what you mean by "sense." A REIT linked to just the leases on existing Sears and Kmart stores seems pretty unappealing on the surface. Would you really want to be betting on the future of Sears physical stores right now? The answer is no. No, you do not want to make a blanket bet that Sears is going to be running physical stores in say five years.

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Obviously there aren't any specifics on what would be offered here but the basic concept of monetizing real estate holdings through a sale leaseback with a REIT created internally isn't new. It's essentially what Bill Ackman wanted Target (TGT) to do back in 2007. Target didn't do it and Sears probably shouldn't, but the move would raise money, though to what end seems unclear.

As I've been delicately pointing out for the last few years, Sears isn't a retailer. It's an asset chopping block. For all his protests to the contrary there isn't any evidence that Eddie Lampert has or ever had any real interest in running Sears to make money as a store. This REIT offering is the beginning of the end game on that front. If Sears was starving on a dessert island, selling off stores to a REIT would be akin to eating its own feet to avoid starvation. It's just not an efficient source of capital.

As for Sears shares, I think it's a miracle they've made it this long. Shares always seem to clip shorts on these maneuvers but the gains don't last. Do what you want but on a fundamental basis I can't overstate one point: it seldom pays to be long retailers that are focused on financing during the holiday shopping season.