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Sears' real estate

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January 19, 2013 – Comments (1) | RELATED TICKERS: SHLD

Earlier, I said that Sears was dead, and that Eddie Lampert might as well try to salvage what he could, but that I didn't think Sears was worth its share price.

On the other hand, Bruce Berkowitz of the Fairholme fund thinks that Sears' real estate is worth $160 a share - and now Sears is trading at $50 or so a share. Sears owns about a third of its real estate, and has below-market leases on the rest.

Berkowitz may be optimistic, though. Sears does not have prime store locations, and real estate is all about location. A lot of Sears stores are in malls with declining traffic. I think there is a lot of uncertainty around the value of Sears' real estate. 

1 Comments – Post Your Own

#1) On January 19, 2013 at 12:24 PM, Teacherman1 (57.24) wrote:

The real estate is why Lampert bought in the first place. It has just taken much longer than he planned for the economy and the real estate market to come back.

There are many locations that are of value only as retail outlets, but a lot of the earlier Sears locations, starting just after the war, are stand alone, prime spots that have much more value.

When I was a kid, (before malls were the norm), Sears was a destination place. Everyone shopped there and would drive from several miles just to get there.

Later, they used part of the excess land to add other stores, some of which are still in business, and some, gone the "way of the buffalo".

I think the key now is to do enough with the retail sector to allow them to hold on for the longer term gains on the real estate value.

It could be a good long term play, but it will take a long time.

A good example of how this could work is Weingarten Realty, in Houston, Tx. Originally, they were a locally owned grocery chain, but as the national brands moved in, it became less and less profitable for them to operate.

Luckily, they owned all of the locations where their stores were located, with extra land around them, so they decided to get out of the grocery business, and take advantage of the real estate.

They have done very well.

Just some thoughts on the subject.

I am too old to look at Sears as a good investment, but for a younger person, buying and holding onto a few shares could prove to be a very good long term investment.

JMO and worth exactly what I am charging for it.

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