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Retailer Target May Get Into Real Estate Business
Nearly everyone is familiar with the shopping chain giant. Retailer Target may get into the real estate business
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(sort of). A prominent investor has proposed an idea where Target would sell the land that its stores are sitting on to a new entity – and then pay rent to that new entity for use of the real estate. Existing shareholders would gain shares of stock within the new business spinoff as well as retaining ownership of their shares in the original Target store. The benefit? The theory is, that the value of the stock would go up as much as 74% and all the shareholders would make big profits/gains on the value of their shares. Essentially, the value of the parts are greater than the total type of philosophy. Regardless if the idea comes to fruition or not – the proposal has already made a big impact. Target shares have increased in value by over $6 billion, and the shares of the investors company have increased in value $600 million. So, just for pitching and publicizing the idea – without even doing anything – hundreds of millions of dollars have been made just on market sentiment for the companies.
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Not to shabby – Didn’t, or doesn’t, Walmart doing something like this? It’s a great way to make tons of money but I’d think it would kill their asset value (could be very wrong). Either way, seems like a win-win – any buyer would get a permanent “trust worthy” renter and Target shareholders would make a few bucks too.
I bet they wish they would have done this in ‘04.
I read something like this a long time ago and can’t remember whether it was Walmart or McDonalds who’s doing the same thing. But instead of selling the land to a 3rd party, the main company buys the land and rents them to the store or franchise.