Investors eye Macy’s real estate spread in buyout bid

A potential buyout for Macy’s has drawn industry eyes to the billions behind the retailer’s real estate assets.

Arkhouse Management and Brigade Capital Management recently offered $21 a share to take the chain private in a bid that adds up to $5.8 billion, or $8.5 billion when considering debt. 

Taking over Macy’s is not necessarily attractive on the retail side. Sales are declining as department stores fade, which the company has attempted to confront by experimenting with new concepts, like smaller stores.

Analysts have instead pointed to the company’s real estate assets as the most appealing part of the deal.

The real estate owned by the retailer is worth about $6 billion, Neil Saunders of research firm GlobalData told the Wall Street Journal. One Bloomberg Intelligence analyst valued the company’s assets in the United States at $8 billion, including $2 billion alone for the flagship store in New York City’s Herald Square, Bloomberg reported. 

“When you look at the value of Macy’s, the real estate is the jewel,” Saunders told the Journal.

Arkhouse and Brigade Capital have multiple options for handling the real estate assets. The simplest may be to sell stores outright. The investors could also look at sale-and-leaseback plans at locations, meaning Macy’s would sell the real estate and lease 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 property market is in a much more volatile and murky state than it was roughly a decade ago, which will impact how much the investors can rake in from asset sales.

Macy’s operates roughly 600 stores, owning about half of them.

Arkhouse and Brigade Capital may also consider spinning off some of Macy’s more prominent brands, including Bloomingdale’s and Bluemercury, a beauty product company is posting year-over-year revenue growth.

Macy’s stock surged by as much as 21 percent on Monday following the news of the takeover bid, first reported by the Wall Street Journal. It closed the day at $20.77, up 19.4 percent on the day, though the stock started coming down in premarket trading on Tuesday.

— Holden Walter-Warner

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