According to the Wall Street Journal, analysts are concerned about rising capital expenses and declining rent at data-center REITs.Digital Realty’s stock is currently the target of a Highfields Capital Management short squeeze.This past May, Digital Realty Trust, Inc. (NYSE:DLR)‘s stock took a dive, but did so along with data center REITs:DuPont Fabros Tech and CoreSite Realty.Fellow Motley Fool blogger Brendon Marasco points out that as a result, Digital Realty is currently paying a 5% dividend to compensate bullish investors for these risks.
Analysts also worry that technology companies such as Amazon.com, Inc. (NASDAQ:AMZN) and Google Inc (NASDAQ:GOOG) are increasingly building their own data centers rather than renting space from REITs. In the future, these REITs will also be in competition for site locations with some of their key tenants. Digital Realty Trust, Inc. (NYSE:DLR) and other companies focused on this space can now deal with a new kid on the block — a kid with a unique and rather large toy chest.
New kid on the block
Sears Holdings Corp (NASDAQ:SHLD) has taken the first steps to implement a comprehensive real estate strategy. SHC Realty was launched in 2010 to conventionally market available properties in an attempt to create value for stockholders by selling and leasing them.
Earlier this year, Sears launched Seritage Realty Trust as a “nationwide developer of commercial real estate” to help oversee a Sears portfolio containing over 200 properties in 33 states and totals over 18 million square feet. Most recently, Sears has launched a new business unit Ubiquity Critical Environments, with the mission of converting some of the more than 330 closed Sears and Kmart stores into facilities for data warehousing, network co-location centers, and business continuity operations. Ubiquity is also spearheading a new initiative to lease cell-towers to be built at existing Sears facilities.
What does this mean moving forward?
Sears Holdings Corp (NASDAQ:SHLD) is in the early rounds of evaluating and extracting the value locked in its vast legacy real estate holdings. It is in the middle rounds of a difficult fight to create a profitable, customer focused retail operation.Sears is currently valued around $5 billion.Amazon is currently valued around $125 billion.I am not currently advocating or trying to make a case for Amazon to acquire Sears.However, I do believe there is a compelling case to be made that Sears is significantly undervalued at the present time. Sears’ vast portfolio of real estate certainly contains pins in the map that could be ideal for Amazon.com, Inc. (NASDAQ:AMZN)’s expansion plans.Could Amazon’s growth be a key to unlocking Sears’ real estate vault? If so, that would certainly be ironic.
The article Amazon and Sears: Strange Bedfellows or a Match Made in Heaven? originally appeared on Fool.com and is written by Bill Stoller.
Bill Stoller has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Bill is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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