Dive Brief:

• Hedge fund Starboard Value Monday released a letter urging department store retailer Macy’s to unleash value from its real estate holdings.

• Macy’s so far has resisted Starboard’s calls to develop a real estate investment trust. 

• But the department store may be hobbled by its recent troubles, including a dim holiday season that had led to plans to close stores and lay off employees. In its post-holiday report the company said it has hired consultants to look more closely at its options regarding its real estate.

Dive Insight:

Starboard Value Monday praised Macy’s for its cost-cutting efforts and, especially, for the more concrete moves it’s made in exploring what to do about its valuable real estate, calling that a “prudent” step.

“The recent announcement that Macy's is moving forward with pursuing joint venture structures ("JVs") for both its mall-based and iconic properties is a good decision for the Company and its shareholders,” Jeffrey C. Smith, Starboard’s managing member, wrote in the letter. “As you well know, we firmly agree that Macy's real estate portfolio is extremely valuable. We estimate the real estate assets are worth $21 billion, which implies that the operating business is currently trading for a negative value.”

Macy’s would only say that Starboard’s statements match up with the steps it’s taking. Those include hiring Eastdil Secured, Credit Suisse, and Goldman Sachs to assist in selling minority stakes in its property. Interested parties include real estate company Tishman Speyer.