Macy’s advised to form new company for real estate

Kansas investors may be interested in hearing about a possible move by Macy’s to either form a separate company for its real estate holdings or enter into a joint venture for them. According to sources, Starboard Value, an investment firm, is suggesting that Macy’s could double its share value by doing so.

Other major retailers, such as Sears, have made similar moves so that they can make more money off of the property they own. In Macy’s case, the company’s real estate holdings are valued at around $21 billion. The CEO of Starboard Value indicates that such a move by Macy’s could result in its stock increasing in value to $125 a share. Reportedly, Macy’s is currently investigating possibly creating a real estate investment trust to which the company would sell its properties and then lease them back.

Currently, Macy’s stock has risen to $72.01 per share, a 7.9 percent increase. Macy’s has 885 stores located across the United States, and the company indicates that it both owns some of the properties while leasing others, helping to make the company both more flexible and more profitable. Sears recently sold 235 stores it owned to a REIT, leasing back the properties in a move that is expected to garner the company $2.6 billion. That REIT is currently being publicly traded on its own.

REITs may be an effective tool through which companies can gain additional income sources from commercial property the companies own. Businesses that are interested in possibly forming a REIT may want to seek the help of a business and commercial law attorney. Legal counsel may be able to help draw up the documentation establishing the REIT as well as help to manage the complex transactions involved.

Source: ABC News, “Starboard Value Suggests Real Estate Transactions for Macy’s“, Associated Press, July 15, 2015

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