The $2.7 Billion Real Estate Deal That Hollowed Out Sears From the Inside

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There are 235 dead Sears stores across the United States. The signs are still up. The doors are locked. And for more than a decade, the buildings underneath them haven’t belonged to Sears at all.

Most people remember Sears as the place their families bought Kenmore washers and Craftsman tools, the company that mailed the Christmas Wish Book to every kitchen table in suburban America. Fewer people know that the company’s collapse wasn’t really about Amazon, or changing shopping habits, or even bad management in the ordinary sense. It was about a single real estate transaction in the summer of 2015, engineered by the man who controlled the company — a hedge fund manager who was, at the same time, both its largest shareholder and its largest creditor.

His name is Eddie Lampert. This is how the buildings outlived the business.

The hedge fund manager who became a retailer

Eddie Lampert started his career on the Goldman Sachs risk arbitrage desk in the 1980s. By 26, he had left to launch his own hedge fund, ESL Investments. By 2006 he was managing roughly $15 billion and was, by some accounts, the richest man in Connecticut.

In 2005, Lampert engineered the merger that defined his career: he combined the bankrupt remains of Kmart, which he had purchased out of Chapter 11, with the still-operating Sears, Roebuck and Co. The new entity was called Sears Holdings. He installed himself as chairman, and in 2013, as chief executive officer.

But Lampert did not run Sears the way a retailer runs a retailer. According to a 2013 Bloomberg Businessweek investigation by Mina Kimes, he restructured the company in 2008 into more than 30 separate business units — apparel, tools, appliances, even human resources — and forced them to compete against one another for resources as if they were rival companies. Kimes described the result as less Atlas Shrugged, the Ayn Rand novel Lampert admired, than The Hunger Games. Internal divisions began undercutting each other. The Kenmore appliance unit reportedly began promoting competitors’ products over its own.

The transaction that changed everything

Between 2007 and 2017, Lampert’s hedge fund lent Sears nearly $2 billion, secured against the company’s assets. This put Lampert in an unusual position: he controlled Sears as its shareholder, and he was owed money by Sears as its creditor. When the company needed cash, he was, in effect, negotiating with himself.

The most consequential of those dealings closed on July 7, 2015.

That day, Sears Holdings transferred 235 of its best store locations, along with 31 joint-venture interests in some of America’s most valuable mall properties, to a newly created real estate investment trust called Seritage Growth Properties. In exchange, Seritage paid Sears $2.7 billion.

On its surface, the deal looked reasonable — a struggling retailer unlocking the value trapped in its real estate. But buried in the master lease was a single provision that changed the entire balance of power.

The recapture clause

The provision was called the recapture clause. It gave Seritage the right to take back up to 50 percent of the square footage of any Sears store, at any time, with limited notice, and re-lease that space to higher-paying tenants — clothing chains, restaurants, gyms — at rents that were often four times what Sears itself was paying.

In practical terms, the moment the deal closed, Seritage no longer needed Sears. The new landlord could begin, slowly and entirely legally, evicting Sears from the buildings it had occupied for decades.

There is one more detail that tells you how the smart money read the transaction. In December 2015, just five months after Seritage was created, Warren Buffett bought an 8 percent personal stake in it. He did not buy Sears stock. He did not lend Sears money. He bought into the company that owned the buildings Sears was sitting in.

The lawsuit

On October 15, 2018, Sears Holdings filed for Chapter 11 bankruptcy in the Southern District of New York. The case was assigned to Judge Robert Drain.

Six months later, on April 18, 2019, the bankruptcy estate’s Creditors Committee filed a 110-page complaint that became the definitive accounting of what had happened. It named five separate transactions — including the Seritage deal — and alleged that across them, Lampert and ESL had stripped at least $2 billion in value out of the company. According to the complaint, the Seritage real estate alone had been undervalued by at least $649 million when it was transferred to a company Lampert controlled.

The legal theory rested on a precedent from a different dead department store. In 2010, a Delaware bankruptcy judge named Kevin Gross had ruled in the Mervyn’s case that multi-step financial transactions could be collapsed into a single integrated event for the purposes of fraudulent-transfer analysis, and that a controlling owner’s fiduciary duty extended to creditors when a company approached insolvency. The Sears Creditors Committee applied that same framework.

Lampert’s lawyers fought it for four years. In August 2019, Judge Drain ruled against ESL on a related claim. Lampert appealed to the district court and lost; he appealed to the Second Circuit Court of Appeals and lost again. In March 2023, the U.S. Supreme Court declined to hear the case. The ruling stood.

What’s left

By 2026, only five Sears stores remained open in the continental United States.

The buildings transferred to Seritage are still being sold off, to developers and higher-paying tenants, at multiples of what Sears once paid. The proceeds flow toward repaying a $2 billion loan that Seritage took from Buffett’s Berkshire Hathaway in 2018 — three months before Sears filed for bankruptcy. Lampert was never held personally criminally liable. He still owns ESL Investments, and he still owns the yacht.

In the 1990s, Sears was where America bought its tools, its appliances, and the Wish Book that arrived every November. In the 2020s, Sears is a real estate vehicle being slowly liquidated by people who never set foot in a store.

The next time you drive past a dead retailer — a Kmart, a Toys R Us, a Bed Bath & Beyond — and wonder what really happened, it’s worth asking who owns the building, and who’s still collecting the rent. The companies that built them rarely see a dollar of it.

Frequently asked questions

What happened to Sears? Sears filed for Chapter 11 bankruptcy on October 15, 2018, after more than a decade of decline under chairman and CEO Eddie Lampert. While online competition played a role, a 2019 Creditors Committee lawsuit alleged that a series of asset transfers — most significantly the 2015 Seritage real estate spinoff — stripped roughly $2 billion in value from the company before its collapse.

What is Seritage Growth Properties? Seritage is a real estate investment trust created in July 2015 to acquire 235 of Sears’s best store locations for $2.7 billion. Eddie Lampert controlled both Sears and a significant interest in Seritage. The transaction’s master lease included a “recapture clause” allowing Seritage to reclaim and re-lease store space to higher-paying tenants.

Did Eddie Lampert go to jail? No. Lampert was never charged criminally. The Sears Creditors Committee pursued civil claims alleging fraudulent transfers. Lampert and ESL contested them through multiple appeals; the U.S. Supreme Court declined to hear the case in March 2023, leaving lower-court rulings in place.

Why did Warren Buffett invest in Seritage? In December 2015, Buffett took an 8 percent personal stake in Seritage, and in 2018 Berkshire Hathaway extended a $2 billion loan to the trust. Buffett invested in the real estate vehicle that owned the buildings — not in Sears the retailer — a signal of where the durable value in the transaction actually sat.

Are any Sears stores still open? As of 2026, only five Sears stores remain open in the continental United States. Seritage continues to wind down by selling its remaining real estate assets.