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In reply to the discussion: Sears Closing Hundreds Of Stores, Many KMart Stores Going Out Of Business As Well [View all]adieu
(1,009 posts)when downtown KMart stores were bought, it was perhaps way back in the early 1900s, way before suburbia was even invented. Back then, the price for the building might have been $20,000 for what would now be valued at $25,000,000 or $100,000,000.
The property isn't going to stay as retail. It could be bought out and turned into office building, or converted into condos or whatever. The point is that on the balance sheet, those buildings were listed at $15,000 or $20,000 because they were bought or built way back when in the early 1900s (K-Mart was founded in 1899). Imagine 200 such buildings in prime downtown locations of Chicago, NYC, Boston, Philadelphia, Pittsburgh, Cleveland, Cincinnati, Louisville, South Bend, Madison, Milwaukee, Atlanta, Richmond, Dover, Harrisburg, Baltimore, Washington DC, Dallas, Austin, on and on.
Each one valued on the balance sheet as virtually $0 because of depreciation, but the market value of those buildings, for whatever use, is $50,000,000 on average. 200 buildings at $50,000,000. There are another 1000 in the suburbia malls, but they were built later (maybe even as recently as 1980s) and the value is much lower.
He sold just the 200 buildings in prime locations and came out with, say, $10,000,000,000. Huge cash generation, made the stock price jump way, way up. He then cashed out.
Then, he bought Sears to try doing the same thing again. But his ego got the better of him and he actually thought he could manage a company, as opposed to cannibalizing a company.