Macy’s, Inc. M has sold the top four floors of its downtown Seattle store to a controlled affiliate of private investment firm Starwood Capital Group for $65 million. The Seattle store, situated in 300 Pine Street, has eight floors. The sold out floors are expected to be transformed into office by the abovementioned firm.
After selling the top four floors, the store’s total floor space has come down to 283,000 square feet from 363,000 square feet. However, the company announced that it would retain all the 265 employees of the store, though some may be reassigned to different departments. Further, the company expects to record a gain of about $60 million from the deal in the third quarter of fiscal 2015.
Earlier this year, there was a rumor that Macy’s would spin off its real estate and related assets to form a real estate investment trust (REIT). The alleged spin off was recommended by Starboard Value, an activist investment firm, which holds stake in Macy’s.
As per sources revealed earlier, Macy’s real estate assets are worth almost 72% of its organization value. Some of the company’s exemplary real estate properties include the Herald Square complex in Manhattan and the properties in Chicago and San Francisco. Additionally, the company has 400 malls in various locations. The proposed spin off is expected to give both flexibility and profitability to the company.
Nowadays REITs are becoming an effective tool to enhance shareholder value for businesses, which are becoming stagnant. Such moves help companies to realize more revenues from the properties they hold.
Macy’s has been struggling to keep itself afloat in the highly competitive retail merchandise sector. The company has posted lower-than-expected sales in the last six quarters, lagging the Zacks Consensus Estimate by an average of 1.3%. Now, it remains to be seen whether the company really conducts the recommended spin off to improve its performance.
Zacks Rank
Macy’s currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in related industry include Express Inc. EXPR, Foot Locker, Inc. FL and Citi Trends, Inc. CTRN. All three stocks carry a Zacks Rank #1 (Strong Buy).
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