Kmart is buyer, but its stores could give way to sears.

While Kmart Holding Corp. has $11 billion on the table to buy Sears Roebuck & Co., some in the Los Angeles real estate community are either seeing "For Sale" signs in Kmart store windows or even a new name outside altogether: Sears.

"Most of the Sears will continue operating, but it's the Kmarts that will likely end up going away," said Mark Weinstein of MJW Investments, the Santa Monica-based firm developing a mixed-use project at a former Sears warehouse in Boyle Heights. "It's a huge real estate play, and Kmart is good real estate land."

The newly formed Sears Holding Corp., which will become the nation's third-largest retailer, is a treasure trove of real estate, as Kmart owns 118 stores in California and Sears operates 90 stores statewide. Selling some of the units will be critical in unlocking value hidden in the merged company, said Rob York, a partner at Fransen Co.

"Kmart has sold off a number of units to competitors that have allowed the company to show profits and boost share price, but management hasn't yet been able to drive top-line sales," said York. "Both companies have underperforming stores so there will be closures."

Kmart sold a few of its least successful L.A.-area stores in January 2002, when it reorganized under Chapter 11 bankruptcy protection. It emerged in May 2003. Earlier this year, Sears bought 50 Kmart stores or leasehold interests for $579.9 million.

Nationwide, thousands of Kmarts could be converted to Sears stores or the new Sears Grand stores (a big-box competitor to Wal-Mart not found in malls), according to Sears spokesman Ted McDougal.

Many Kmarts are free-standing, while nearly all of Sears stores are in malls. One of the main reasons for the merger was to get Sears out of the mall and into the communities, McDougal said.

"Sears' growth has been hampered because of its mall stores," he said. "This is not because of its merchandise, but because it's not located where its customer base is, as suburban growth moves farther away from the mall."

The only Southern California Sears Grand store is in Rancho Cucamonga. But Sears mall stores will likely not become Kmarts anytime soon, as Kmart has no plans to move into the mall.

In the L.A. area, where both companies have underperforming stores, analysts are guessing that there will be closures--and that a majority of them will be Kmarts due to their valuable real estate.

"Real estate developers are very interested in turning some Kmart stores into residential communities," said Jack Kyser, senior vice president and chief economist at the Los Angeles County Economic Development Corp. "You have to ask yourself about some of the weaker real estate locations, 'Are they really worth more dead than alive?'"