SHLDQ - Sears Holdings Corp

[BTShine]

Went to a mall in the suburbs tonight after work.  It's a middle, or lower middle-class suburb of Minneapolis.  The Sears had lines around 5:30PM (3 to 6 people deep at each register; 5 to 10 minute wait).  The JCPenney had shorter lines (1 to 3 people deep). 

 

Hanging around the register to listen on customer/salesperson interactions, I could hear 2/3rds of the customers talking about (or responding positively when prompted by the sales associate) Shop Your Way rewards points, SYW deals, etc. 

 

 

[merkhet]

Looks like another property sale might be in the works soon.

 

http://www.contracostatimes.com/news/ci_24769359/negotiations-advance-sale-sears-building-downtown-oakland

 

"I feel we're very close to a deal, but by the same token this is still very fragile," Dones said Friday. He would not disclose the purchase price or his investors. City sources confirmed that negotiations were advancing and that a deal could be in place shortly.

 

Tax assessment has the property at around $22 million.

Oakland_01.pdf

[Luke 532]

Looks like another property sale might be in the works soon.

 

http://www.contracostatimes.com/news/ci_24769359/negotiations-advance-sale-sears-building-downtown-oakland

 

"I feel we're very close to a deal, but by the same token this is still very fragile," Dones said Friday. He would not disclose the purchase price or his investors. City sources confirmed that negotiations were advancing and that a deal could be in place shortly.

 

Tax assessment has the property at around $22 million.

 

If they sell it the price will be interesting.  Much of Berkowitz's real estate thesis is based on tax assessed values... so this will help determine the accuracy of that.  Although either way it's just one data point, so probably not extremely meaningful.

[fareastwarriors]

I'm live like less than 10 minutes away from that store. I'm glad someone is willing to buy it and redevelop the store/area. That Sears store is just sad.  During a protest, vandals destroyed some windows. But months and months later, it is just plywood at the window front... 

 

 

and the Oakland location is among the company's prime properties.

The land is a prime area but the store has no foot traffic. It's  depressing and empty inside.

[BTShine]

I would say that the Chicago Sears on State Street, or the Sears Anchor at the Mall of America, or many of the other Sears stores are more valuable than this one in Oakland.  When they say "it is among the company's prime properties," it really depends upon your definition of prime properties.

 

 

[merkhet]

I'm live like less than 10 minutes away from that store. I'm glad someone is willing to buy it and redevelop the store/area. That Sears store is just sad.  During a protest, vandals destroyed some windows. But months and months later, it is just plywood at the window front... 

 

The land is a prime area but the store has no foot traffic. It's  depressing and empty inside.

 

I would say that the Chicago Sears on State Street, or the Sears Anchor at the Mall of America, or many of the other Sears stores are more valuable than this one in Oakland.  When they say "it is among the company's prime properties," it really depends upon your definition of prime properties.

 

I think they mean prime in terms of the location. It reminds me a little bit of the story a poster shared about keeping a store so dilapidated that you get paid to renovate it.

 

There's a store like that in Houston too. The downtown Sears @ 4201 Main Street is a joke. I'm not sure I've ever seen anyone in that parking lot. The tax assessed value of the property is around $5.2 million, but I'm almost certain that the property is worth more dead than alive.

 

And I think that's the interesting proposition when it comes to metrics like sales per square feet. My guess is that there are other zombie stores like the Oakland and Houston that artificially depress sales per square foot while inflating SG&A. If they can sell these properties off, they get a cash infusion and improve their metrics.

[texual]

ESL is just looking to consolidate as much of this as he can. he will even resort to letting this stagnate for ten years. Do not be surprised when early January rolls around and he picks up another 200 million for his personal account. Guy's about as ruthless a businessman as I have ever come across. I would never underestimate him, and I have stayed the course.

 

Be wary of his endgame when he says hes 'fed up running the business as it currently stands' which is code for 'ive bought all the shares I need, my partners cashed out and I bought em all, lets party.' and I'm thinking the party is almost here.

[texual]

He and bruce berkowitz will just start buying up small tiny businesses and invest cash into existing stocks of other retailers and businesses. Long term, permanent capital vehicle is exactly what both of them want and they both own SHLD in the double digits. I wouldn't be surprised if Berkowitz joins the board down the road.

[plato1976]

frankly, why this looks to me a wishful thinking ?

so far, I see only spinoff - and I only see more spinoff ahead.

 

He and bruce berkowitz will just start buying up small tiny businesses and invest cash into existing stocks of other retailers and businesses. Long term, permanent capital vehicle is exactly what both of them want and they both own SHLD in the double digits. I wouldn't be surprised if Berkowitz joins the board down the road.

[muscleman]

ESL is just looking to consolidate as much of this as he can. he will even resort to letting this stagnate for ten years. Do not be surprised when early January rolls around and he picks up another 200 million for his personal account. Guy's about as ruthless a businessman as I have ever come across. I would never underestimate him, and I have stayed the course.

 

Be wary of his endgame when he says hes 'fed up running the business as it currently stands' which is code for 'ive bought all the shares I need, my partners cashed out and I bought em all, lets party.' and I'm thinking the party is almost here.

 

 

 

How much more cash does his personal account have?

Another 200 million is not small though.

I hope we could know more about the details of the 3.5 bn redemption.

If the market is hit with that many shares, it may drop A bit more

[CorpRaider]

He and bruce berkowitz will just start buying up small tiny businesses and invest cash into existing stocks of other retailers and businesses. Long term, permanent capital vehicle is exactly what both of them want and they both own SHLD in the double digits. I wouldn't be surprised if Berkowitz joins the board down the road.

 

Sweet mother of…. No more retail!

[Evolveus]

Here is an inteesting thesis/article I just stumbled across (as if we don't have enough already:))

 

http://www.valuewalk.com/2013/12/boiling-the-sears-situation-down-to-the-essentials/?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+ValuewalkBusiness+%28ValueWalk+%C2%BB+Business%29

[Luke 532]

Here is an inteesting thesis/article I just stumbled across (as if we don't have enough already:))

 

http://www.valuewalk.com/2013/12/boiling-the-sears-situation-down-to-the-essentials/?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+ValuewalkBusiness+%28ValueWalk+%C2%BB+Business%29

 

Here's the link to the direct source.  http://www.valueplays.net/2013/12/23/sears-real-estate/

[bmichaud]

I assume SPG, GGP, JCP and SHLD, combined, is a decent proxy for quality retail SF. Here is some data, in millions. 

 

SPG: 242

GGP: 126

JCP: 54 (quick look at a SA article that said JCP owned 49% of its 111.2MM SF)

SHLD: 68

Total: 490

 

Say SHLD ultimately keeps 20% of the 68 - that leaves 54.4 to be redeveloped and leased out, which works out to just over 11% of proxy group's total SF.

 

Will it take 20 years to develop and lease 11% of the quality SF outstanding? I have no idea.

 

Say Seritage redevelops and leases out half of the 54.4 within 5 years, and sells the remaining SF. Assume the 27.2 + the 13.6 leased to SHLD trades for $250/SF in the market, and it costs $80/SF to redevelop the 27.2, while the remaining 27.2 is sold for $150/SF.

 

The retained 40.8 would be worth $6.9B, net of redevelopment, and the sold portion $4.1B, for $11B in total. 5-year present value at a 10% discount rate is $6.83B today, or $64 per share.

 

Would purchasing the highest quality portion of SHLD's portfolio not be a slam dunk investment for a GGP or SPG? They could probably pay $300/SF and still generate a very healthy IRR from what I assume would be very strong lease rates in the highest quality malls.

 

 

Looks like Todd read my comment the other day  ;D    lol kidding of course, but he makes a great point - it just seems like a slam dunk that SPG and/or GGP would buy SHLD real estate and just redevelop it themselves.

[Evolveus]

Sorry if that link took folks on a goosechase.  I couldn't tell - I had just puled it off of Twitter and posted thru my iphone...for whatever that's worth.

[Luke 532]

Sorry if that link took folks on a goosechase.  I couldn't tell - I had just puled it off of Twitter and posted thru my iphone...for whatever that's worth.

 

No wild goosechase at all.  I just wanted to post the direct link as Todd has a great blog.

[heth247]

Here is an inteesting thesis/article I just stumbled across (as if we don't have enough already:))

 

http://www.valuewalk.com/2013/12/boiling-the-sears-situation-down-to-the-essentials/?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+ValuewalkBusiness+%28ValueWalk+%C2%BB+Business%29

 

Here's the link to the direct source.  http://www.valueplays.net/2013/12/23/sears-real-estate/

 

Why can't GGP/SPG buy from JCP? Why assume GGP/SPG will be in growth mode in the next few years? wasn't somebody predicting a "Mall crash" in the future?

[texual]

He's going to throw the towel in for the retail ops soon. He will sell off the entire thing minus whatever crap they can spin off and unload debt. There will be massive rapid firings and store closures. They'll be too busy screaming bloody murder while he cashes out the remaining partners and takes the whole thing for himself and Fairholme and whoever of us is still around.

 

Then comes the part where they figure out what Sears Holdings is really all about for the next 50 years.

 

In 2010 I attended the meeting and I wrote this down in my notebook and even had ESL for a minute to chat with - he told the group that 'five years from now this company, to some will be completely unrecognizable.'

 

2014 is upon us. I think it will undergo massive transformation very fast and the market will be unable to react to it. That or they will just be too confused. ESL is many years ahead and will have personal control of 30% of holdings.

[texual]

This company is play by play the next Berkshire hathaway.

 

All you need to do is roll back the tape as Berkowitz says.

 

The entire thing reeks of an insurance and asset heavy company utilizing buybacks and run by an allocator who knows what he is doing when it comes to the track record. He runs a hedge fund thats basically closing before our eyes. He only owns SHLD and will continue to hold shares while he cashes out. I expect him to sell AN to buy more SHLD.

 

The ops suck. The market understands nothing. Fairholme gets it, Chou funds gets it. Some of us get it. Its very simple to mask the permanent capital vehicle behind the failing operations. The owner and allocator is much too smart to let the retail operations continue or to try to really save it when he has proven to compound at rates as good if not better than WEB.

 

Why run Sears when he can really just be who he is, a investor?

 

 

[texual]

I will be increasing my position in early January when I expect ESL would be doing it too. If not I will wait for the low 40's high 30's.

 

Just so we're being transparent and my bias in favor of the company is clear. I am a net buyer.

[Mephistopheles]

Not quite sure what this means:

 

"Buying all of Sears is effectively buying a 20% interest in GGP alone, given the owned space and respective stock valuations. That’s why I say it’s like an arbitrage. This doesn’t include any other assets, operating businesses, or space in other malls like Simon.

 

What’s a 20% interest in GGP worth? — $3.7 billion at today’s price."

 

Why is it a 20% interest in GGP? Sears owns 12 million sq ft in GGP malls. GGP owns 126 million sq ft, based on what bmichaud posted. So that 12 million would be less than 10% of all of GGP's real estate, assuming they would take over all of it.

 

Or am I missing something?

 

[peridotcapital]

Hi all,

 

Wanted to wish you all happy holidays and provide a link to two blog posts I published in recent days re: SHLD. Not much new here outside of what I have been sharing with you all over the last couple weeks, but figured I would share anyway in case you were interested.

 

http://www.peridotcapitalist.com/category/consumer/retail

 

I'm going to take some time off here around year-end, so while my posting frequency might slow down a bit, I'm not going anywhere. And if anything big happens, I'll be sure to check in and see everyone's thoughts. I will eagerly await the 10-K in late February and as of right now hope to go to the annual meeting in the spring (it should be an interesting one, I'd bet!). If anyone else is planning to attend, definitely let me know.

 

Talk soon!

 

Chad

[merkhet]

Hi all,

 

Wanted to wish you all happy holidays and provide a link to two blog posts I published in recent days re: SHLD. Not much new here outside of what I have been sharing with you all over the last couple weeks, but figured I would share anyway in case you were interested.

 

http://www.peridotcapitalist.com/category/consumer/retail

 

I'm going to take some time off here around year-end, so while my posting frequency might slow down a bit, I'm not going anywhere. And if anything big happens, I'll be sure to check in and see everyone's thoughts. I will eagerly await the 10-K in late February and as of right now hope to go to the annual meeting in the spring (it should be an interesting one, I'd bet!). If anyone else is planning to attend, definitely let me know.

 

Talk soon!

 

Chad

 

Chad, happy holidays to you as well.

 

I want to say that it has been incredibly helpful to have someone take the other side of the Sears thesis. Some of us (including myself) have benefited immensely from having someone consistently challenge our views and interpretations of the news around Sears. I am sure that sometimes it might feel like we're ganging up on you (there are more Sears longs than Sears shorts/bears on this thread), but I hope you continue to bring your thoughts and insights to this thread. It has been all the better for it.

[peridotcapital]

Hi all,

 

Wanted to wish you all happy holidays and provide a link to two blog posts I published in recent days re: SHLD. Not much new here outside of what I have been sharing with you all over the last couple weeks, but figured I would share anyway in case you were interested.

 

http://www.peridotcapitalist.com/category/consumer/retail

 

I'm going to take some time off here around year-end, so while my posting frequency might slow down a bit, I'm not going anywhere. And if anything big happens, I'll be sure to check in and see everyone's thoughts. I will eagerly await the 10-K in late February and as of right now hope to go to the annual meeting in the spring (it should be an interesting one, I'd bet!). If anyone else is planning to attend, definitely let me know.

 

Talk soon!

 

Chad

 

Chad, happy holidays to you as well.

 

I want to say that it has been incredibly helpful to have someone take the other side of the Sears thesis. Some of us (including myself) have benefited immensely from having someone consistently challenge our views and interpretations of the news around Sears. I am sure that sometimes it might feel like we're ganging up on you (there are more Sears longs than Sears shorts/bears on this thread), but I hope you continue to bring your thoughts and insights to this thread. It has been all the better for it.

 

Well said. I also have appreciated coming to this thread to test my thesis as well. I would never short this stock, so if it starts to fly before I become convinced enough to get in, I'll be thrilled for the longs. Ideally we could ride the wave together at some point in the future. At the very least, the story should get more and more interesting in coming quarters, which will make for great conversation!

[bmichaud]

Interesting comments on CMBS activity and distressed deals coming on the market via JCP and SHLD.

 

http://www.cnbc.com/id/101265712

 

 

"We expect many will continue to look at distressed commercial opportunities, especially those being created by large retailers with vast real estate assets like JC Penney and Sears, to name just a couple," said Brian Shapiro, CEO of Simplify, a New York-based advisory and data firm that tracks hedge funds. "The outlook is moderately positive."