Starwood Capital Group now owns the top four floors of a Macy’s store in downtown Seattle.
The store is located at 300 Pine Street. The transaction value for more than 300,000 square feet of space is $65 million. In turn, Macy’s Inc. will record a gain of $60 million in the third quarter, a quarter earlier than expected. Because the gain was anticipated, Macy’s had already included it in its 2015 earnings guidance.
Macy’s said floors five through eight are owned by an affiliate of Starwood and will be converted to office use. Floors one through four, plus a lower-level floor, will be reconfigured by fall 2016 to accommodate all existing merchandise categories, Macy’s said. The store will remain open during the reconfiguring, which when completed will total 283,000 feet of selling space.
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Terry J. Lundgren, retailer’s chairman and chief executive officer, said, “Our vision is to make the store easier and quicker to navigate while also attracting new jobs and economic activity to space that has not been fully utilized in recent years.”
Lundgren added that the transaction is an “example of the company’s ongoing efforts to enhance shareholder value by identifying and pursuing strategic real estate dispositions while maintaining the flexibility we require to run a successful business.”
A spokesman said the company has been working for several years to find a way to make more productive use of the space of the upper floors of the Seattle store, and not in response to any investor activity.
In July, an activist investor, Starboard Value, disclosed a stake in Macy’s. At the time, Starboard’s Jeffrey Smith cited the high values of Macy’s retail properties. Starboard often pushes companies to consider options aimed at unlocking assets, particularly real estate holdings.
At the time, Macy’s issued a statement noting its real estate strategy is to have a “mix of owned and leased stores” to maximize profitability and operational flexibility. The company added: “We recognize the potential attractiveness of real estate investment trusts and similar alternative real estate ownership structures in today’s marketplace. We are currently evaluating those structures including analyzing the various economic, tax, operational and other issues associated with them.”