Once Again, Dillard's Targeted By Property-Focused Activist Investors

It seemed investors didn’t quite know what to make of activist investor Snow Park Capital Partners’ new 2-percent stake in Dillard’s, Inc. DDS Class A stock. Shares initially traded up 5.3 percent Monday in pre-market trading before promptly falling 6.7 percent after the open.

Snow Park’s purchase compounds the existing stakes of activist investors Marcato Capital Management and Greenlight Capital, but even their aggregate ownership isn’t enough to really shake corporate leadership.

The Dillard family remains in control of the firm through Class B shares and is authorized to elect two-thirds of the board, according to Bloomberg.

The New Threat

Snow Park acknowledged a particular interest in Dillard’s real estate portfolio, about 90 percent of which the company owns and a quarter of which is in high-end malls.

“Dillard’s is essentially an underleveraged real estate company that is masquerading as a low productivity retailer,” managing partner Jeffrey Pierce told Bloomberg.

Pierce appraised Dillard’s real estate holdings above $200 per share, with an average sales-per-square-foot value of about $125.

“It’s fair to say that Dillard’s may not be getting the highest and best use for some or all of their owned space,” Pierce said. “In fact, our estimated rental value to more productive retail tenants exceeds the company’s entire current income as a retailer.”

Snow Park intends to repurpose store locations or accelerate closures to capitalize on the real estate value, following a precedent set by Dillard’s shutdown of about 50 sites between 2008 and 2016.

Marcato Capital unsuccessfully pressured Dillard’s to spin off property into a real estate investment trust in 2014.

At the time of publication, Dillard’s was trading at $73.93, down 6.3 percent on the day, and had not responded to request for comment.

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