New research argues that the real-estate holdings of

Sears Roebuck

(S) - Get Report

are worth twice as much as Wall Street thinks, opening up a new round of argument in the debate about Ed Lampert's master plan.

Citigroup Smith Barney analyst Jonathan Litt raised his estimate of Sears' real estate portfolio to $8 billion to $10 billion from $4 billion to $6 billion, based on a study of 866 Sears stores. The list included information on location, square footage, year-of-construction, landlord, estimated sales volume and sales per square foot.

Lampert has consistently played down the role of real estate in his decision to merge

Kmart

(KMRT)

with the department-store chain three weeks ago. A vocal chorus of observers, nevertheless, doubts it when he claims asset sales were never a factor in his reward calculus.

"I don't think any retailer should aspire to have its real estate be worth more than its operating business," Lampert told investors, even as he acknowledged the role land and store sales had in running Kmart up 70% prior to the merger.

Pundits are still debating Lampert's prospects for competing with the likes of

Wal-Mart

(WMT) - Get Report

and

Target

(TGT) - Get Report

as the chairman of the new, combined company, Sears Holdings. Litt's research, however, implies Lampert is sitting on a goldmine before he integrates a thing.

Litt put Sears' overall value at about $17 billion, or $80 a share, significant upside to its current market value of $53.11 a share. Such a valuation suggests Lampert's merger proposal, which values the company at $10.6 billion, or $51 a share, is low.

But Litt's valuation is not uncontroversial. The market's main reservation about Sears' real estate is that an estimated 90% of its sites are mall-based properties. With the latest trends showing consumer spending migrating away from malls, analysts questioned whether buyers exist for Sears properties. Even the merger strategy unveiled by Lampert involves moving Sears stores into Kmart's attractive, off-mall locations.

"I'm just not sure who is going to want to move into the mall right now" said Morningstar analyst Kim Picciola. "Not only is it a question of who, but it's also when. It's not like you're going to unleash the value of these stores all at once, especially if the economics in the market happen to have more supply than demand."

Also, mall properties like those usually used by Sears, known as anchor stores because they make up the biggest space in the mall, are often leased through complex agreements with the mall landlord. These agreements can strip the retailer of its leverage in liquidating the value of the lease.

Litt acknowledged that these factors make Sears' mall-based locations worth less than its free-standing locations. "However, the last thing a mall landlord wants is to have a closed anchor," he wrote. "The value of the mall anchor box ... is not completely lost as the mall anchor has certain of its own rights" under the covenants of the agreement.

Litt said landlords have used vacated anchor locations to build new department stores or open movie theaters, big-box retail stores, food courts and outdoor, lifestyle wings, incorporating things like restaurants and specialty retailers.

The report estimates that Sears owns 60%, or 516, of its 871 stores. Meanwhile, the company's free-standing sites, making up around 10% of its portfolio, have huge potential for untapped value, like a 165,000 square-foot store in Santa Monica, 10 blocks from the beach, or a 133,000 square-foot store at the bottom of a large office building on 2 North State Street in downtown Chicago.

The potential for upside value led Litt to conclude that Lampert's plan to merge the company with Kmart is not yet a done deal.

Vornado

(VNO) - Get Report

, the real estate investment trust whose recently disclosed stake in Sears sparked the asset-value speculation, is evaluating the deal. (Litt acts in a fiduciary capacity for an account of a nonprofit organization that holds a long position in Vornado, and Citigroup has an underwriting relationship with Vornado.) Others could be interested as well.

"Potential bidders for Sears include other retailers, private opportunity funds and real estate players," Litt said. "We believe Vornado is not alone in taking a hard look at making a bid for Sears, given the apparent value remaining in the shares.