Just days after announcing it was hiring a specialist to help it negotiate deals to extract more money from its property, Macy's said on Tuesday it was adding a real estate executive to its board of directors.
The department store, which has been pressured by activist investor Starboard to spin off its most valuable locations into a real estate investment trust (REIT) to boost shares, announced that William Lenehan, CEO of Four Corners Property Trust, a REIT, would join its board of directors next month.
"Bill 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," Macy's CEO Terry Lundgren said in a statement. Lenehan will join the board on April 1.
Last week at an investor conference, Lundgren said he was hiring a real estate specialist to negotiate deals to make the most of Macy's extensive real estate, which includes crown jewels such as the Macy's flagship stores in Manhattan, San Francisco and Chicago, as well as the main Bloomingdale's store in New York City.
Though Macy's said late last year that it had concluded that creating a REIT was not a good idea, as it would create rent expenses and loosen the company's control over its stores, the department store chain has been making moves to earn money from its property.
For instance, in January, Macy's closed on a $270 million deal in which it gave up the top floors of its building in downtown Brooklyn but also got $100 million to remodel the store on the lower floors. Lundgren said last week it was too labor intensive for him and his finance chief, Karen Hoguet, to negotiate such deals piecemeal, hence the decision to hire an outside expert.
The push to extract money from its physical properties comes as the retailer's sales have declined. In 2015, comparable sales at Macy's fell 3% and it expects a 1% dip this year. What's more, the $27 billion a year retailer is in the process of closing 36 stores in a fleet of nearly 800 locations.
Other retailers, including direct rivals Sears (shld) as well as Lord & Taylor and Saks Fifth Avenue parent Hudson's Bay (hbc), have extracted billions from their real estate. But Macy's has balked at a wholesale spin-off of its stores, preferring to look for individual arrangements for its best properties.
"We will always be a retailer first. And that’s our primary business," Lundgren said last week.