Dillard's REIT and Sale-Leaseback Deal

Dillard's Enter to a Sale leaseback Agreement with REIT

NEW YORK (Dow Jones)--Shares of U.S. department-store operators climbed Thursday as investors made bets on which retailers may follow Dillard's Inc. (DDS) is taking advantage of a booming market for real-estate investment trusts.
Dillard's said in a regulatory filing late Wednesday it believes the formation of a REITmay enhance its ability to access debt or preferred stock and therefore improve its liquidity. The retailer said it plans to transfer interests in certain properties to the REIT and will then lease back the properties.

Sale-Leasebacks can offer an alternative form of conventional financing. Sale-Leasebacks allow business owners to unlock capital currently allocated to a potentially illiquid asset. Sale-Leasebacks can facilitate business owners in the sale of their real estate, while simultaneously structuring a long-term net lease with the purchaser, allowing the business to retain control of their asset.

Advantages Monetize your real estate Obtain 100% fair assessed value of your asset Improve working capital Convert illiquid assets into cash Consummate transactions quickly Improvement on company balance sheet Avoid risk of real estate ownership Increase borrowing capacity Attain tax advantages Lease terms and conditions can be tailored to meet the needs of the seller Enhance financial liquidity What can a sale-leaseback be used for? Sale-leaseback' have a broad area of disbursing cash proceeds for a company.Some of the more common reasons of why clients have participated in sale-leasebacks are: Pay down det Finance Operational Growth and Investment Construct new facilities Purchase new equipment Invest in new technology Reallocate capital into core business activities Mergers and Acquisitions Executive and/or Management Restructuring Buy back company stock Cash proceeds in result of a sale-leaseback have no limit on the expenditure. A sale-leaseback transaction is a great alternative form of financing which allows business owners to fully maximize the value and position of their real estate assets.

REITs are surging after one of the worst downturns in commercial real estate in a generation. REITs outperformed the broader equity markets again last year and mall and shopping-center REITs were among the top-performing sectors amid rising retail sales and an economic recovery.
Dillard's shares closed 12% higher at $41.96 and lifted shares of other department stores despite weakness in the broader market. Among the biggest gainers were Sears Holdings Corp. (SHLD), up 5.2% at $75.90, Macy's Inc. (M), which climbed 2.1% to $23.40, and J.C. Penney Co. Inc. (JCP), up 3.5% to $30.10.
Retailers "with a significant amount of owned real estate would be looking at a transaction like this to see how it unfolds," said BMO Capital Markets analyst Wayne Hood.
Sears declined to comment while a representative for Macy's couldn't immediately be reached. A J.C. Penney spokeswoman said she couldn't comment on the stock movement.
J.C. Penney has been the subject of speculation since activist investor William Ackman's Pershing Square Capital Management and real-estate investment trust Vornado Realty Trust (VNO) disclosed a large stake in the company last fall.
Ackman was involved in one of the most high-profile retail/real-estate disputes when he was a large shareholder in Target Corp. (TGT). He had proposed a real-estate transaction in which Target would have spun off the land under its stores as a publicly traded real-estate investment trust, something the company rejected. Ackman attempted in 2009 to get himself and four other dissident candidates elected to Target's board but has since trimmed his stake after losing the bid.