Real Estate

Real estate a bright spot for Sears’ stock value

Eddie Lampert is no retail genius, but never underestimate his talents as a liquidator.

Shares of Sears Holdings have surged nearly 20 percent over the past two days as a new report argues that hedge-fund tycoon Lampert, the retailer’s chairman and CEO, could easily sell its real estate for more than the entire company’s stock-market value.

“Demand and pricing for space in high-quality malls where Sears owns space is at an all-time high,” according to a 139-page report published this month by Baker Street Capital, citing a “property-by-property analysis” of Sears’s mall-anchor locations.

That’s a bet that has fallen out of fashion in recent seasons on Wall Street, despite Lampert’s track record of selling off some of Sears’s best stores for princely sums since he merged the 120-year-old retailer with Kmart in 2005.

Baker Street, a Los Angeles investment firm that is now among Sears’s biggest stockholders, calculates that at least $7.3 billion of value lies in the company’s top 350-owned stores and its top 50 leased locations.

By comparison, Sears has a market capitalization of just over $6 billion — after a two-day rally. The stock rose nearly 7 percent Tuesday, to close at $56.64, after gaining nearly 13 percent on Monday.

Lampert, who has boosted his Sears stake by 50 percent over two years, was named chief executive officer in January.

Last month, he signaled that more asset sales are in the offing as the company reported a wider-than-expected loss as sales continued to tumble on weakening demand for its appliances, tools and clothing.

Lampert said he was “disappointed” in the latest results and pledged to improve operations. But critics have accused the hedge-fund mogul of deliberately starving the chain for cash in what amounts to a gradual liquidation of the company.

Either way, analysts lately have argued that it would be complex and difficult for Sears reap a bonanza on its real estate, as there is limited demand for the mall-anchor locations of its Sears stores, which number more than 900 in the US.

Baker Street counters that “Sears’ real estate value is highly concentrated in its top locations, which is critically important when thinking about monetization options.”