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Activist investor urges Macy's to consider REIT

Florida residents may be aware that several prominent retailers and restaurateurs have sought to generate cash recently by transferring some of their properties to real estate investment trusts. The investment group Starboard Value have been vocal proponents of this strategy, and the activist company's CEO urged Macy's to follow Sears and Darden Restaurants down this path during a July 15 investor conference.

According to Starboard, the value of Macy's stock could double if the company decided to form a REIT. The Ohio-based retailer has a formidable commercial real estate portfolio that includes landmark stores in New York City, Chicago and San Francisco. Starboard say that these three locations could generate $6 billion if they were sold on the open market, and the investment firm says that the 885 Macy's and Bloomingdale stores across the country are worth over $21 billion.

Transferring real estate assets to a REIT and then leasing them back has become more popular among cash-strapped businesses with significant real estate holdings. Sears announced in April that it hoped to raise $2.6 billion by selling over 200 properties to a REIT, and Florida-based Darden Restaurants said in June that it hoped to pay down a large portion of its debt by transferring approximately 430 of its restaurant locations to a REIT. Starboard Value took control of Darden in 2014.

While real estate transactions can raise large amounts of cash or generate significant incomes, they are sometimes difficult to complete and the paperwork involved is often complex. An attorney with real estate law experience may help the parties involved in a real estate transaction to avoid disputes by bringing attention to contract provisions that could be contentious. An attorney could also assist real estate developers and investors with zoning issues and permit applications.

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