stc1

Target Decides to Let Stock Languish

Todd -

You're first paragraph after the Ackman presentation, Market Value, basically defeats your entire thesis. Target currently owns the real estate. Target has a "market value" today of $32.00 per share, including that real estate. If the market isn't wrong (and it isn't), there isn't any incremental value to be harvested from that real estate by this idiotic TIPREIT structure. Ackman made a poor investment decision. He bought TGT, a discount retailer with maybe 7%-8% annual core earnings growth, at roughly 20x earnings, twice where it's trading today. Financial engineering isn't going to unlock some illusory additional "market value" from the stock.

BTW, there aren't any "comps" for this REIT structure. There are no REITs that own land only. There are no REITs with 100% exposure to a single tenant. And the idea that this is comparable to TIP Treasuries is ludicrous. TIPs are backed by the U.S. Treasury. TIPREIT is backed by a mediocre discount retailer with lots of competition.

If Target wants to raise cash via its real estate, it should seek out a couple of sale/leaseback deals with major triple net REITs. If they're lucky, they'll get some nice 12%-13% money (with CPI escalators) in today's market.

I feel bad for Ackman's investors. Anybody with a clue listening to this presentation must realize the guy's "genius" is laughably overrated.