In another nod to the pressure it’s facing to unleash value from its real estate, Macy’s Inc. Tuesday named real estate investment expert William H. Lenehan to its board of directors, effective April 1.
Lenehan is president and CEO of real estate investment trust (REIT) Four Corners Property Trust, Inc. and has extensive experience in real estate development and investment.
The news comes a day after Macy’s said it would hire a specialist to help decide what to do with its vast real estate holdings and is mulling joint ventures with other companies to manage its flagship and mall-based stores.
It seems that Macy’s is no longer resisting the idea to extract value from its real estate portfolio. “We like having control of our real estate,” Macy’s CFO Karen Hoguet said at a March conference with investors last year.
But activist investor Starboard Value has thrown its weight around, and Macy’s, saddled with tepid sales in the confounding department-store space, has changed its tune.
CEO Terry Lundgren said Lenehan will "contribute to our board’s expertise and working knowledge on matters related to real estate, an important area of activity as we work to create shareholder value through joint ventures or other partnerships related to Macy’s flagship stores and mall properties."
Still, Macy’s could pay a price with a REIT or sales of some of its properties. It’s true that such moves would extract dollars, and the value of the real estate vs. the retail operations would be made clear. But it could hurt the retailer’s flexibility and its ability to close or remodel underperforming stores, Miriam Gottfried wrote last year in the Wall Street Journal. According to Gottfried, a REIT would also force Macy's to spend money on lease payments that it might rather use to improve its retail business.
The push could be a distraction from Macy’s core business, something that it’s still struggling to master in the new consumer-driven, omnichannel universe.