Is Macy's Moving Closer to a Big Real Estate Transaction?

NEW YORK ( TheStreet) -- Department store retailer Macy's (M) may be moving closer to a value-creating real estate transaction, but investors shouldn't expect executives to rush into anything.

"We are focused on creating real value with our real estate," emphasized Macy's CFO Karen Hoguet at a presentation at the Nomura Retail Conference on Tuesday.

Reiterating recent comments that any transaction involving real estate such as the creation of a real estate investment trust, or REIT, would be "complicated," Hoguet nevertheless laid out a case for some kind of deal. The executive pointed to the rise in real estate values across the country since the bottom of the financial crisis in 2009, and the potential to work closely with a mall developer.

Further, Hoguet acknowledged that retailers in the past have borrowed against their real estate, a process referred to as "levering up," to fund share repurchases and stock buybacks. But Hoguet said any potential deal with a bank or strategic partner would need to be substantial and make strategic sense. 

Shares of Macy's are currently up close to 1% after the executive's comments.

Macy's latest comments add fuel to the recent speculation regarding its intentions with its attractive real estate holdings. On June 2, Reuters reported that several hedge funds have asked the U.S. department store heavyweight to consider options for its real estate, including selling several major sites and then leasing them back to Macy's. The maneuver is called a "sale-leaseback transaction."

According to the report, multiple unnamed hedge funds have amassed stakes in Macy's in recent months, and have held conversations with management about implementing the strategy. Macy's and its financial advisers have been listening to the proposals, according to the Reuters report.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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