The potential acquisition of Macy’s has focused industry attention on the billions of dollars behind the retailer’s real estate assets.
Arkhouse Management and Brigade Capital Management recently offered $21 a share in a bid to take the chain private, for a total price tag of up to $5.8 billion, or $8.5 billion after taking debt into account.
For retailers, a Macy’s acquisition isn’t necessarily attractive. Sales have been declining due to the decline of department stores, but the company is trying to combat this by experimenting with new concepts such as smaller stores.
Instead, analysts point to the company’s real estate assets as the most attractive part of the deal.
Neil Saunders of research firm GlobalData told The Wall Street Journal that real estate owned by retailers is worth about $6 billion. One Bloomberg Intelligence analyst values the company’s U.S. assets at $8 billion, including $2 billion at its flagship store in New York City’s Herald Square alone. Bloomberg reported.
“When you look at the value of Macy’s, real estate is the jewel,” Sanders told the Journal.
Arkhouse and Brigade Capital have multiple options for handling real estate assets. The easiest thing to do might be to sell the store completely. Investors may also consider a sale-and-leaseback plan for each store, where Macy’s sells the real estate and leases it back from the buyer.
Macy’s previously sold several real estate assets, including stores in Brooklyn and San Francisco, for $270 million each. Of course, the commercial real estate market is much more volatile and uncertain than it was about a decade ago, which will impact how much money investors can make on property sales.
Macy’s operates about 600 stores and owns about half of them.
Arkhouse and Brigade Capital may also consider spinning off some of Macy’s more prominent brands, such as Bloomingdale’s and Bluemercury, a beauty products company that has recorded year-over-year sales growth. .
Macy’s stock rose as much as 21% on Monday following news of the tender offer, which was first reported by the Wall Street Journal. Shares closed the day 19.4% higher at $20.77, but the stock began to decline in pre-market trading on Tuesday.
— holden walter warner