Shares of Macy’s surged over 19% on Monday after receiving a $5.8 billion buyout offer from real estate investor Arkhouse Management and asset manager Brigade Capital Management. The 165-year-old retail giant has experienced a decline in sales, and the offer underscores the appeal of its robust real estate portfolio.

Estimates for Macy’s real estate portfolio vary, with projections ranging from $5 billion to $11.6 billion. Neil Saunders, GlobalData’s managing director of retail, emphasized the significance of the company’s real estate, stating that it is the core of the deal. Real estate investors find Macy’s profitable retail business appealing, as opposed to other big box retailers, making the deal more attractive.

However, the bid is lower than Macy’s asset values, highlighting the challenges facing retail real estate. Converting large, million-plus-square-foot retail buildings into alternative use spaces is not a simple task, as it involves rezoning difficulties, high interest rates, and a lack of demand for office space.

While the bid presents potential challenges, the retailer’s prime locations are a point in its favor. Residential conversions, particularly during a housing shortage, could unlock additional value for Macy’s. Additionally, other financial bidders entering the buyout process remains a possibility.

The offer comes as Macy’s continues to navigate the changing retail landscape. The growth of e-commerce, a more cautious consumer, and shifts in brand preferences have exacerbated challenges for the company and the broader department store industry.

The future of Macy’s remains uncertain, with the possibility of private ownership allowing for more freedom, change, and restructuring. Luxury chain Bloomingdales and cosmetics store Bluemercury, which have fared better financially than Macy’s, could also be sold off individually. Despite its long history, Macy’s faces a pivotal moment as it considers the buyout offer and the implications for its future business operations.