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"There has always been the belief that there is a tremendous amount of hidden value in the real estate that Sears owns or controls that is not reflected on the balance sheet," said Nell Stern, retail consultant with McMillan/Doolittle. "Eddie Lampert has figured this out at Kmart and gotten [more than] $1 billion from what he's sold so far."

More specifically, it's a total of $847 million for the sale of 50 Kmart stores to Sears and 18 units to Home Depot, and what Lampert stands to gain as the majority shareholder of Kmart, having driven the stock up 640% since it emerged from Chapter 11 bankruptcy protection in May 2003. And that is all based on the value of Kmart's real estate, not its future worth as a retail concern.

It's part of a larger trend in the retail industry to better realize non-retail-sales-related financial assets. A Deutsche Bank report issued in July looked at the real estate assets of 37 retailers and concluded that Sears was undervalued. Analyst Bill Dreher believes the stock could be valued as high as $105 per share.

But, unlike Lampert, who owns 31.1 million shares of Sears' stock and is the company's largest single shareholder, Vornado isn't expected to influence Sears' financial decisions. "Historically, Vornado has been a patient investor in retail real estate. The prime example of this is their investment in Alexander's Department Store, which they have held for approximately 10 years," said JP Morgan's Margaret Cannella. "They are likely making the same kind of investment in Sears." Vornado has a history of investing in retailers. In addition to Alexander's, the company bought the Two Guys retail stores, eventually turning it into a realty company. Additionally, Vornado owns Manhattan commercial properties, retail locations and the Merchandise Mart in Chicago.

But the interest by both Lampert and now Vornado seems to indicate a double vote of confidence that Sears will move to turn its real estate into cash, either by turning it into a real estate investment trust or through a sale and lease-back plan. "That's why the stock reacted so dramatically," said Stern. "It's certainly an indication that there is something there and that Sears is likely to act on it."

Sears owns approximately 60% of its mall-based stores and approximately 46% of its full-line and specialty locations. But turning real estate into ready cash may require assistance, particularly for a retail company used to focusing on merchandising and store expansion.

"I don't think it's as easy as everybody thinks," said Stern. "If Sears could, they would figure out how to do that." Chairman and ceo Alan Lacy didn't hesitate to sell the company's financial services business to raise cash for its retail turnaround. Realizing assets from real estate would likely fall into that same "unlocking shareholder value" column. It could also be a winning move for a retailer still trying to reinvent its stores and position in the marketplace by increasing its cash position, funding store remodeling and new prototypes and propping up stock prices until sales increase. But would it detract from the business at hand, primarily selling merchandise?

"This has a lot more to do with assets than the retail business," said Stern. "It would be a financial issue, not a focus issue. You could do this without any impact on the retail business."

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