Macy’s Looks to Sell $275M of Real Estate Next Year

The activist investor group pushing Macy’s to monetize its real estate may be making inroads, if the company’s new earnings report is any indication.

The storied department store chain anticipates selling $275 million in retail properties next year, the Commercial Observer reported. The revelation, in the third-quarter earnings report released this week, is $125 million above previous forecasts.

Accelerated store closures appear to be fueling the increase. Macy’s previously announced it would close 55 stores in the coming year, but the earnings report tacked on another 10. CoStar has estimated that Macy’s properties are worth $5 billion to $14 billion — an incredibly broad range, but in any case more than the company’s $4.6 billion market capitalization.

In an earnings call, CEO Tony Spring said the “fact that we are closing more stores this year is a reflection of the fact that our assets have value, and even in this less stable market we’re transacting.”

A group of investors headed by Al Laboz’s United American Land bought a 440,000-square-foot Macy’s space in Downtown Brooklyn this month with a plan to redevelop the historic property at 422 Fulton Street. Citing a source, the New York Post reported the sale price to be a lowly $23 million, but added that an immediate stake sale to an investor valued the property at $80 million.

The increased attention on Macy’s real estate comes as an activist investor group consisting of Joseph Sitt’s Thor Equities and Barington Capital Group calls for Macy’s to form a separate real estate unit to help sell properties.

In a presentation, the investors estimated the Macy’s real estate portfolio to be worth $5 billion to $9 billion. The subsidiary they want would control the company’s owned and leased properties, to which the retailer would pay rent.

Sitt pointed to an opportunity to maximize the flagship store in Manhattan’s Herald Square.

In response to the activist investors’ presentation, Macy’s said in a statement that it was confident in its strategy, but was looking forward to engaging with the group.

Macy’s reported net sales of $4.7 billion in the third quarter, down 2.4 percent year-over-year.

— Holden Walter-Warner