The Real Deal New York

Activist Macy’s investor ups pressure to cash in on real estate

Separating properties could create $10B for shareholders, says Starboard
January 12, 2016 08:34AM

Hedge fund Starboard Value is ramping up pressure on Macy’s, suggesting a scheme by which the firm could purportedly create $10 billion in shareholder value by reorganizing its real estate holdings.

Starboard, which announced its stake in the department store in July, suggested that Macy’s separate its big-city flagship stores from its mall properties, creating joint venture entities for each, in a presentation sent to the retailer.

“Macy’s real estate portfolio is extremely valuable,” Jeffrey C. Smith, Starboard’s CEO, wrote in a letter. “A JV, or series of JVs, can crystallize the value of Macy’s real estate while bringing in a partner with substantial capital and real estate expertise.”

Macy’s, which in November rejected Starboard’s prior calls to reorganize real estate assets into a real estate investment trust, has struggled in recent months with declines in traffic at its stores. The company’s shares lost 47 percent of their value in 2015, Bloomberg reported.

Last week, the firm announced it had hired Eastdil Secured to market its flagship stores, including its Herald Square store, to potential joint venture partners.

Earlier this week, Isaac Chera’s Crown Acquisitions signed a 99-year ground lease at 136-50 Roosevelt Avenue in Flushing, which is home to a Macy’s store. [Bloomberg]Ariel Stulberg