LIMITED SELLS INTEREST IN JERSEY CITY TOWER
Byline: Sharon Edelson
NEW YORK — Taking a long, hard look at its business, The Limited Inc. is continuing to dispose of noncore assets but has developed new criteria to evaluate its core brands. And those that don’t fit the bill reportedly could be sold — all in the name of improving shareholder value.
On Thursday, Limited said it had sold its stake in the Newport office tower in Jersey City, N.J., to TrizecHahn for $159 million.
The company reportedly is considering selling other real estate in its base inColumbus, Ohio, and its 40 percent stake in its credit card business, retail analysts said this week. Limited declined to comment.
“They’re in the process of divesting themselves of noncore assets, raising the cash and using the cash for things that are positive to shareholders, whether that’s buying back shares or reinvesting in businesses that need reinvesting,” said Steven Kernkraut, a managing director at Bear Stearns. “They pulled in money from Newport and are also in the process of selling some office buildings in Columbus. They also developed the Tuttle Crossing Mall,” which they could sell, he added.
“This is a sign that they want to do what’s best for shareholders,” he said. “If you have a noncore asset that’s not earning a return, you convert the noncore asset to cash. You want to make sure that all the capital that you have invested is earning a solid return for shareholders, and real estate is not always the most fruitful investment.”
Limited also owns 40 percent of the Brylane catalog. It sold 60 percent of the business in 1993, and analysts expect the company to sell more in the future.
Apparently, Limited is putting its smaller businesses under similar scrutiny.
“The Limited is saying that unless a business can be $1 billion in size, it doesn’t pay to be in it,” Kernkraut said. “That’s really the criterion. They want to focus management’s attention on the big issues. This is a company that will be much more focused over the next three years.”
For months, retail experts have speculated that the company’s smaller businesses, such as Henri Bendel, which has never been profitable under Limited’s ownership, and Cacique, may be disposed of at some point.
“The other brands, Express, Lerner New York and the Limited, are positioned to be fixed,” Kernkraut said. “But if, in over two years’ time, some of them are not working, you could see some more store closings.
“None of those three businesses requires a lot of investment now,” he added. “Maybe they won’t regain their star power of the Eighties, but they should be able to improve all three of those franchises.”
Kernkraut said another criterion for judging the brands is their international potential.
“They want brands that they can take globally,” he said. “They are seeing there is international potential in Victoria’s Secret, Bath & Body Works and Abercrombie & Fitch.”