Starboard pushes Macy’s to enter real estate deals

Macy’s, Inc. (NYSE:M) activist investor, Starboard Value Lp is again pushing the big retailer to explore ways for realizing higher value of its huge real estate holdings, which includes its popular Herald Square store in NY.

With another 400 mall locations worth about $13 billion, Macy’s had a real-estate value of about $21 billion, Chief Executive Jeffrey Smith said at a conference past year.

Starboard owns a 1.04 percent stake in Macy’s as of September 30, according to Thomson Reuters data.

The company had not released a public reply to Starboard’s letter as of press time. The company said it looks forward to continued dialogue with Starboard and other shareholders.

The fund sent a letter to Macy’s president and chief financial officer, outlining how separating the properties into two or more entities would create $10 billion in shareholder value.

Macy’s said last week that it’s seeking to sell portions of its signature Manhattan, San Francisco, Chicago and Minneapolis stores, as well as mall-based properties. The activist investor, in a letter and presentation to Macy’s management Sunday, said although it supports the retail chain’s cost cuts, it wants the company to follow-through with real-estate deals to bolster cash reserves, the Journal reported. The stores have been suffering from change in consumer’s preference from in-store sales toward online shopping.

Through this structure, Macy’s could raise up to $8 billion in total debt through fundraising at its JVs, enabling the department store chain to pay down most or all of its debt at the parent company level.

Macy’s shares were up 2.5 percent at $36.79 in premarket trading on Monday.

Starboard also reiterated that Macy’s stock could trade as high as $70, almost double its Friday closing price of $35.89. “We believe that a joint venture, or series of joint ventures, can crystallize the value of Macy’s real estate while bringing in a partner with substantial capital and real estate expertise that will enable the joint ventures to grow and diversify their real estate holdings”.