Macy's Inc. M
Macy's owns $21bn of real estate — more than its entire enterprise value; spinning iconic and mall properties into two JVs unlocks ~$70/share, ~88% upside.
Thesis
Starboard argues Macy's $21bn real estate portfolio — anchored by Herald Square, Union Square, State Street, and Downtown Minneapolis plus 407 owned mall stores — exceeds the company's $18.9bn enterprise value, meaning the core retail business trades for negative $10bn after adjusting for credit card earnings. The fix is to drop down iconic properties (~$6.8bn) and mall properties (~$9.7bn) into two separate JVs, raise ~$8bn of asset-level debt to retire OpCo net debt, and sell 15% stakes to real estate partners as valuation markers — mirroring the Hudson's Bay/Simon and RioCan transactions struck at 5.3-5.9% cap rates. Macy's would retain 85% ownership, ~95% of cash flow, control over remodels, and its investment grade rating, while shareholders capture roughly $70 per share versus the $35.89 current price.
SCQA
Macy's owns the largest department store real estate portfolio — 565 properties, 125 million square feet, including iconic Herald Square, Union Square, State Street and Downtown Minneapolis flagships plus 407 owned mall stores.
The market gives Macy's zero credit for this real estate: at $35.89, the core retail operating business is implicitly valued at negative $10bn, even though the property portfolio alone is worth ~$21bn — more than the entire enterprise value.
Drop iconic and mall properties into two separate JVs (~$16.5bn combined), raise ~$8bn JV-level debt to retire OpCo debt, sell 15% stakes to real estate partners, and distribute 85% of JV cash flow back to Macy's.
Sum-of-parts implies ~$67.64 per share (OpCo $42.77 + JV stakes $24.88) versus $35.89 current price — 88.5% upside, while preserving 95% of cash flow, the dividend, and the investment grade rating.
The three reasons
- 1
Macy's owned real estate is worth ~$21bn — more than its entire enterprise value
- 2
Two JVs (iconic + mall) can unlock ~$10bn while preserving 95% of cash flow and IG rating
- 3
Hudson's Bay/Simon and RioCan deals prove JV cap rates of ~5.3-5.9% are achievable today
Primary demands
- Drop down Macy's iconic stores and majority of mall stores into two separate JVs (combined value ~$16.5bn)
- Raise ~$8bn of debt at the JV/asset level and use proceeds to repay OpCo net debt and repurchase stock
- Sell ~15% stakes in each JV to reputable real estate partners as a valuation marker
- Distribute 85% of JV cash flow back to Macy's OpCo to preserve ~95% of current free cash flow
- Maintain investment grade rating by targeting 3.5x Adjusted Debt / EBITDAR at the OpCo
- Pursue subsequent monetization of remaining ~$4bn of real estate (C-mall stores, distribution centers, Brooklyn/Seattle/Portland flagships)
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Precedents cited
- Hudson's Bay / Simon Property Group JV (Nov 2015, ~5.9% cap rate)
- Hudson's Bay / RioCan JV (Nov 2015, 5.26% cap rate)
- MGM REIT IPO spin
Notable slides (6)
Notes
Classic Starboard real-estate-unlock thesis on Macy's, leveraging the Hudson's Bay/Simon and RioCan precedent transactions struck weeks earlier. Highly numerical: property-by-property valuation with cap rates by asset quality grade (A++ through C-), pro-forma capital structure, and Before/After cash flow tables. No villain — collaborative tone toward Macy's management; not a proxy fight. Author not personally signed; presented under Starboard Value firm name (Jeff Smith leads the firm). No stake disclosed in the deck. Strong sum-of-parts opener on p.6 ('core retail trading for negative $10bn'); detailed property valuation on p.8-10; payoff slide on p.23 with $67.64 vs $35.89 ($70/share goal). Outcome historically: Macy's resisted full REIT separation, did limited monetization (Brooklyn, Union Square partial sale), and stock subsequently declined materially with the broader department store collapse — thesis effectively did not play out.