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As Sears shrinks, it’s increasingly taking on role of landlord

Sears Holdings’ (SHLD) efforts to fix its finances have led it to double down on one way to shrink its store base: serving as landlord to other retailers.

The struggling department store chain, which has made some big moves lately to raise hundreds of millions in cash, is leasing space at seven of its most desirable locations to up-and-coming British retailer Primark as that low-price, fast fashion chain looks to expand outside of Europe with its first U.S. retail locations.

Sears, which has history going back to 1887, has in the past five years done similar deals with chains such as Whole Foods Market (WMT), Dick’s Sporting Goods (DKS), Nordstrom Rack (JWN), Forever 21, Corner Bakery, West Elm (which is owned by Williams-Sonoma (WSM)), and German grocer Aldi. Sears operates about 757 namesake U.S. full-service stores and also owns the Kmart discounter.

The retailer, which has closed dozens of Sears department stores in the last two years, is slowly trying to shrink its footprint as its sales plummet. (Sears says it is in the midst of “transforming” itself from a primarily bricks-and-mortar retailer into a membership-driven chain focused on e-commerce. But improvements are slow in coming—comparable sales at Sears department store rose 0.2% in the first half of the fiscal year.)

These leases are primarily situations where Sears owns the property and is renting out space. But in the case of the space Primark is taking at King of Prussia Mall in suburban Philadelphia, which is owned by Simon Property Group (SPG), it is a sublease. At that mall, one of the country’s busiest and most coveted, Sears is already subletting space to Dick’s and is leaving altogether. In the six other deals with Primark, including a store in Staten Island, N.Y., Sears is keeping space.

Sears declined to say how much the leases would generate, but it is clear it needs more cash, quickly.

The retailer also announced an offering of debt rights and warrants that could generate as much as $625 million during the holiday-shopping season, in an apparent bid to quiet concerns among vendors and lenders about its liquidity. (Shares jumped on Monday, so looks like it worked. Two weeks ago, Sears’ shares tumbled after a news report said one vendor had stopped shipments to the retailer, a report that Sears called misleading.)

The company has already been hustling to get some cash ahead of the holiday season. It has announced plans to sell most of its stake in Sears Canada and tapped CEO Eddie Lampert, whose hedge fund ESL Investments is Sears Holdings’ biggest shareholder with a 48.5% stake, for a big loan. All those steps have put it on track to raise $1.445 billion in cash this year, excluding the measures announced on Monday, which would bring the total to $2.07 billion.

And once again, Sears is knocking on Lampert’s door: ESL said it intends to exercise its portion of the subscription rights in the offering in full, which would result in at least $303 million if all other investors pass up on the opportunity.