Macy’s Inc. shares rose 2.3 percent after Greenlight Capital reported a stake in the department-store chain, saying a private equity firm might work with a real estate investment trust to acquire the retailer.
Though Macy’s rejected the idea of turning into a REIT last year, such a plan may make more sense now that the stock price has declined, Greenlight said in a letter to investors.
“While it’s unlikely that management will reverse course on its own, it wouldn’t surprise us if a private equity firm teamed up with a REIT to buy the company and unlock the value privately,” said the firm, which is run by David Einhorn. “Even if this doesn’t happen, the shares are cheap.”
The stock rose to $38.76 in New York on Monday. Macy’s shares lost 47 percent of their value last year, hurt by a broader slump in the department-store industry.
In discussing a real estate deal, Einhorn echoes remarks from activist investor Starboard Value, which has been pushing for Macy’s to tap its properties since July. The retailer’s real estate, including its flagship store in Manhattan, is worth $21 billion, according to Starboard’s analysis. That’s more than the company’s current enterprise value.
The retailer said in November that it had decided against a REIT, an effort Starboard endorsed. Instead, the company is considering selling portions of its flagship Manhattan, San Francisco, Chicago and Minneapolis stores, as well as mall-based properties. Tishman Speyer is interested in taking stakes in the locations, Macy’s said. The company is searching for a real estate executive who could oversee the effort, including any partnerships or joint ventures.
Macy’s, based in Cincinnati, also is slashing jobs and closing about 40 locations in an cost-cutting push.
Greenlight’s involvement isn’t likely to change Macy’s strategy, but the company does have to figure out how to use its stores more efficiently, said Bridget Weishaar, a Chicago-based analyst at Morningstar Investment Services.
“It’s going to be a pile of little things more than one big deal,” she said. “I do think there’s value there that can be unlocked.”