Sears Canada is returning two high-profile stores in the Toronto area to its landlords in a transaction valued at C$191 million, while agreeing to sell an option on a third that could generate another C$53 million if exercised over the next five years.

The move comes as the struggling department store executes its three-year transformation plan while preparing for the expansion of cheap-chic Target, which opened its first Canadian stores in March, and the arrival of another major U.S. retailer, Nordstrom, sometime in 2014.

In a statement, Sears Canada said its stores at the Yorkdale Shopping Centre in Toronto and at the Square One Shopping Centre in nearby Mississauga, Ontario, will be returned to Oxford Properties Group and Alberta Investment Management Corp., the co-owners of both properties.

The deal requires Sears to vacate the stores by March 31, 2014. The transactions are expected to close on June 24.

The publicly held, multi-channel merchant also granted the owners an option to acquire the lease on its store at the Scarborough Town Centre, in the east end of Toronto, for an addition $1 million. If the option is exercised, the cost will be $53 million.

Retail industry observers have suggested the leases may go to Nordstrom. Premium retail space, particularly in Canada's major urban centers, is fairly scarce and landlords appear to be willing to buy back leases to attract what may potentially be higher performing retailers.

Last year, Sears Canada sold the leases to downtown stores in Vancouver, Calgary and Ottawa to Cadillac Fairview for C$170 million. Those locations will reopen under the Nordstrom banner early next year.

Sears Canada President and CEO Calvin McDonald said the company was "presented with an opportunity that gives us a significant financial benefit without changing our plans to improve the business and make Sears more relevant to Canadians."

In another real estate move, Sears Canada has applied to the City of Burnaby, British Columbia - a suburb of Vancouver - for approval to redevelop nine acres of property it owns to build an office and condominium tower complex, which observers have valued at about $1 billion. It will be mixed-use project and will include a new Sears Canada department store to replace the existing store.