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Sears Holdings


kyleholmes
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  • 2 years later...

so many two year old threads getting bumped. bad etiquette.

 

Is it? If there's something new, it's probably best to find an existing thread - if one exists - than to start a new one so that someone who's new to the conversation can look at what has been said before in one spot rather than having to find 10 threads.

 

IMHO.

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Can anyone help me with some Real Estate info on SHLD?  I am working on valuing individual stores and would love any lists of owned stores etc. that would help.

 

Thanks.

 

This is an interesting request, as there are over 1,300 Sears and Kmart stores in the US and a total of 4,000+ locations in all.  Have you looked at the list of locations (by state) in the 10k?  The information in the 10k will let you make some estimates of total owned sqft and total leased sqft and with a little work you can break that down a bit more by format.  Are you planning on trying to value these individually?  The guys at Fairholme claim to have done so, but it would be one hell of a project. 

 

 

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Can anyone help me with some Real Estate info on SHLD?  I am working on valuing individual stores and would love any lists of owned stores etc. that would help.

 

Thanks.

 

Other than EDGAR

 

http://www.sec.gov/cgi-bin/browse-edgar?company=+&match=&CIK=shld&filenum=&State=&Country=&SIC=&owner=exclude&Find=Find+Companies&action=getcompany

 

I would suggest...

 

http://www.shcrealty.com/

 

 

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Here's one place to start: http://securities.stanford.edu/1036/SHLD_01/2007511_r01c_064053.pdf

 

From page 23-24:

 

On August 23, 2004, Kmart announced the final agreement for the sale of 18 stores to Home Depot for $271 million in cash. That agreement was comprised of a sale of 4 owned stores for $59 million, or $14.75 million per store. It also included the sale of 14 leased

stores for $212 million, or $15.143 million per store.

 

On September 30, 2004, Kmart announced it had completed the sale of 50 stores to Sears, Roebuck (4 owned stores, 45 leases transferred and 1 owned store leased to Sears, Roebuck) for $575. 9 million . This equates to a per store value of $11.520 million. While

Lampert's sales of those 68 Kmart stores represented the sale of only 4.49% of Kmart's real estate assets, those sales fetched the astonishing sum of $846.9 million.

 

Obviously one thing to keep in mind is that present-day Sears owns/leases the stores that Kmart sold to Sears before the merger.  Also, the other key takeaway is how much value is in the leases...

 

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Valuing each of 4,000 stores individually is a fool's errand.  You will literally be guessing 4,000 times.  A professional commercial real estate appraiser would need to spend time at each location and work through piles of paper just to come up with a number that is a guess.  And you will do it with Google, etc.?  I respect the initiative, but think that this is when Buffett's quote is in order:  "I'd rather be approximately right than precisely wrong".  Good luck.

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Valuing each of 4,000 stores individually is a fool's errand.  You will literally be guessing 4,000 times.  A professional commercial real estate appraiser would need to spend time at each location and work through piles of paper just to come up with a number that is a guess.  And you will do it with Google, etc.?  I respect the initiative, but think that this is when Buffett's quote is in order:  "I'd rather be approximately right than precisely wrong".  Good luck.

 

this exercise has already been done by Fairholme. I don't believe they will be willing to share their findings, however.

 

I can just see Bruce sitting there in his home office with the Pekingese sitting on the desk furiously googling each address and valuing it based on the satellite view and some reviews on Yelp.  Maybe if someone asks nicely he will just send over the file.  People are nice like that, they like to share hundreds or thousands of hours of work.

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Valuing each of 4,000 stores individually is a fool's errand.  You will literally be guessing 4,000 times.  A professional commercial real estate appraiser would need to spend time at each location and work through piles of paper just to come up with a number that is a guess.  And you will do it with Google, etc.?  I respect the initiative, but think that this is when Buffett's quote is in order:  "I'd rather be approximately right than precisely wrong".  Good luck.

 

this exercise has already been done by Fairholme. I don't believe they will be willing to share their findings, however.

 

I can just see Bruce sitting there in his home office with the Pekingese sitting on the desk furiously googling each address and valuing it based on the satellite view and some reviews on Yelp.  Maybe if someone asks nicely he will just send over the file.  People are nice like that, they like to share hundreds or thousands of hours of work.

 

your imagination is vivid. But he hired consultants to go through property tax records for each piece of property owned by shld.

 

Did BB say in an interview that the properties were valued at $100/share at one point? I faintly remember that, but that could be wishful thinking.

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Hey Biaggio

 

I think the value he quoted was @90.00 per share.  This was pre 2008, I believe, which may mean that the real estate value has decreased substantially.  However, the share count has also decreased substantially.  If the percentage decrease in share count equals the decrease in real estate value it may still be @ 90.00 per share.

 

I will look for the article or interview where the real estate value was quoted.

 

 

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  • 3 weeks later...

Thanks for the help.

 

A simple way I look at the owned real estate is to take a low rental rate ($3-$4psf) and capitalize it at a competitive rate for similar properties (8-10%). 

 

This gives you a conservative RE value between $27 ($3psf @ 10%cap) and $45 ($4psf @ 8%cap) per share.

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Thanks for the help.

 

A simple way I look at the owned real estate is to take a low rental rate ($3-$4psf) and capitalize it at a competitive rate for similar properties (8-10%). 

 

This gives you a conservative RE value between $27 ($3psf @ 10%cap) and $45 ($4psf @ 8%cap) per share.

 

I can see paying $3-4 psf for warehouse/industrial, but that has to be awfully low for office/retail mall (malls with sears in them around here are still very nice). Maybe it makes sense if it factors in that they don t own some of their real estate + that they will just be subleasing it

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  • 4 weeks later...

Just valuing the OWNED real estate using $3psf in rent @ a 10% cap rate you come to $27/share in owned real estate value.  I think this is well below the true value of the real estate but was trying to show a conservative and easy approach to get some type of valuation.  Interesting that shares are now trading at $45+/- when the owned real estate alone achieves a $45 valuation with a fairly conservative estimates of $4psf in rent sold at 8% cap rate.

 

It is also important to remember that this assigns no value to the leased stores which I think hold a positive value.  Examples of this are the sublets to Whole Foods in North Carolina, Forever 21 in California and the various sublets to Edwin Watts Golf (link: http://blog.icsc.org/?p=50 ). 

 

Anchor tenants, such as Sears and Kmart, hold a lot of power in lease negotiations with landlords.  This is because all of the small shop space is made leasable (and valuable) by the traffic the Anchors generate.  Thus, if Sears is unable to sublet their underperforming locations at a profitable rate, I am confident that they wouldn't have much trouble exiting leases early.  As a landlord I would rather go find a new anchor tenant that will "try" than have a Sears that is falling apart and not driving traffic to the center due to a lack of reinvestment.

 

 

 

 

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  • 3 months later...

Just valuing the OWNED real estate using $3psf in rent @ a 10% cap rate you come to $27/share in owned real estate value.  I think this is well below the true value of the real estate but was trying to show a conservative and easy approach to get some type of valuation.  Interesting that shares are now trading at $45+/- when the owned real estate alone achieves a $45 valuation with a fairly conservative estimates of $4psf in rent sold at 8% cap rate.

 

It is also important to remember that this assigns no value to the leased stores which I think hold a positive value.  Examples of this are the sublets to Whole Foods in North Carolina, Forever 21 in California and the various sublets to Edwin Watts Golf (link: http://blog.icsc.org/?p=50 ). 

 

Anchor tenants, such as Sears and Kmart, hold a lot of power in lease negotiations with landlords.  This is because all of the small shop space is made leasable (and valuable) by the traffic the Anchors generate.  Thus, if Sears is unable to sublet their underperforming locations at a profitable rate, I am confident that they wouldn't have much trouble exiting leases early.  As a landlord I would rather go find a new anchor tenant that will "try" than have a Sears that is falling apart and not driving traffic to the center due to a lack of reinvestment.

 

http://www.marketwatch.com/story/sears-adds-exec-to-focus-on-real-estate-assets-2012-03-20?link=MW_latest_news

 

Sears Holdings Corp. on Tuesday named real estate industry executive David Lukes to a newly created position in which he will lead the development of the retailer’s real estate assets, including reuse of stores the company has announced it will close.

Lukes, formerly president and chief executive of the closely held $3 billion real estate firm Mall Properties Inc., will help Hoffman Estates, Ill.-based Sears to “further develop certain of its real estate assets, including those real estate assets that are no longer in use as retail stores,” the company said.

 

Jeff Stollenwerck, president of the company’s SHLD real estate business unit, will continue in that role and oversee the traditional corporate real estate functions for Sears Holdings, Sears said.

 

“Historically, Sears has selectively realized value from its real estate holdings through store acquisitions, strategic store sales, and our leasing and licensed business programs,” said Sears Chief Executive and President Lou D’Ambrosio. The hiring of Lukes “allows us to expand our capabilities to include the enhancement and redevelopment of appropriate properties.”

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