Market analyst Jeremy Skrezyna believes Macy’s, Inc. M could unlock tremendous value via corporate restructuring.
Skrezyna predicts Macy’s will soon follow the blueprint of Hudson’s Bay Company.
He values Macy’s real estate alone at $26 billion.
In a new article from
SumZero,
analyst Jeremy Skrezyna discussed why he sees 130 percent upside to
Macy’s share price. According to Skrezyna, the key to Macy’s value is
its real estate.
Realistic Precedent
It has become quite trendy in recent years for analysts to make
hypothetical suggestions for how companies could unlock real estate
value via corporate restructuring. However, Skrezyna believes that a
solution for Macy’s is not simply a hypothetical. He is suggesting that
Macy’s follow in the footsteps of Hudson’s Bay Company (HBC), which
recently used mortgages and JVs to unlock real estate value.
The Plan
In his article, Skrezyna spelled out how each step of the HBC model would work for Macy’s.
“I believe Macy’s will take the approach that has already worked for
HBC: (i) get an appraisal on the Herald Square flagship coupled with a
35 percent LTV mortgage, using the cash proceeds to repay higher coupon
debt and (ii) create a JV with an operator like SPG, contribute and
leaseback a portion of fee-owned real estate in exchange for ownership
of the JV, publicly float the JV, incur mortgage debt at the contributed
properties just prior to contribution to generate cash proceeds, with
the JV assuming the debt upon property contribution, and use the debt
proceeds to repay existing debt and repurchase shares.”
Valuation
Skrezyna believes Macy’s real estate is worth $26 billion alone.
Since the company’s enterprise value is $24 billion, Macy’s retail
operations are currently valued at -$2 billion.
Skrezyna predicts Macy’s management will eventually determine that
this type of restructuring is too good of an opportunity to pass up. He
forecasts that Macy’s will be fully valued at $90/share sometime within
the next one to two years.
