Macy’s Inc. (M) remains under pressure to increase shareholder value even after the stock soared just after it beat analysts' earnings estimates and announced it will close 100 stores to bolster margins. See: Macy’s Approaches Critical Price Level Before Earnings (M, AMZN)).

$21 Billion in Real Estate

A clear sign of that pressure comes from one of Macy’s shareholders, activist investor Starboard Value, which has urged the major department store to monetize its real estate holdings in order to unlock value.

In a report issued in January of this year titled, “Unlocking Value at Macy’s,” Starboard outlined a plan for tapping into that value for the benefit of all of the company’s shareholders.

Starboard says Macy’s total real estate assets are worth just under $21 billion, which is more than the company’s entire enterprise value, currently sitting at around $17.3 billion. Its flagship store, located in Herald Square, is alone worth as much as $3.97 billion. Other notable properties include seven Downtown Macy’s locations valued at $3.35 billion and 407 owned mall locations valued at $8.87 billion in total.

Real Estate Spinoff Option

Starboard believes that by spinning off Macy’s real estate holdings into a separate portfolio could create an additional $10 billion worth of shareholder value. The proposed structure for a separation would essentially be to create a real estate investment trust (REIT) that would provide Macy’s with liquid cash flow to pay down debt, repurchase shares, or invest in future growth, and all while retaining control over property decisions.

By creating separate real estate investment vehicles, the intrinsic value of Macy’s real estate holdings can be realized in market values attached to these separate vehicles, which would add to the company’s overall market value. (To read more, see: What is the difference between intrinsic value and current market value?).