Bill Ackman, the brilliant Hedge Fund Manager, who has been 2 steps ahead of the economy over the past decade, was on CNBC this morning. Earlier this year, he announced he was taking close to a 10% stake in Target. He has now created a financial instrument, (REIT), that divides up and sells the value of the land beneath the stores to investors. This is no small move, and has many implications for things to come in the future which will impact our economy. It shows a renewed interest in commercial real estate as an investment vehicle, and as a method for controlling the interests of a company. It also capitalizes on a depressed economy.
Often, when a chain of stores is nearing bankruptcy or losing value, they rely upon the value of the land beneath their stores as collateral. In Ackman’s scenario, he removes this safety net for short term cash flow and gain for shareholders. If Target gets into trouble, as the creator of the REIT, and a 10% shareholder, he will have increased leverage for control of the company. Here’s the video:
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