LITTLE ROCK, AR—Department store operator Dillard's Inc., headquartered here, would do well to spin off its real estate assets into a REIT, Marcato Capital Management said in a presentation made public Thursday. A Dillard's spokeswoman declined to comment; the company, which owns most of its stores, had proposed forming a REIT in 2011 but the plan did not reach fruition.

Unlike Sears Holdings Inc., which is considering a REIT spinoff of 200 to 300 stores, Dillard's reported growth in earnings per share for the third quarter. Marcato managing partner Richard McGuire acknowledges the retailer's success in recent years.

“Dillard's has improved its inventory assortment and gross margins, reduced excess SG&A and unproductive advertising expenses, and closed underperforming stores,” says McGuire, whose San Francisco-based company owns 4.9% of the outstanding Dillard's stock. “While the company has utilized its capital efficiently to repurchase a substantial percentage of its outstanding shares, we believe there is more that can be done to create substantial long-term shareholder value.”

Creation of a standalone REIT, according to the Marcato proposal, would value the two companies—an OpCo and a PropCo—at a combined $193 per share, representing a 75% increase from current prices. “We encourage Dillard's board and management to actively explore this opportunity to the extent it is not presently doing so,” says McGuire, who earlier this month reiterated his call for Intercontinental Hotels Group to seek a merger partner.

The Marcato presentation identifies a number of companies that have either executed REIT spinoffs in the past 18 months or have considered doing so. They range from SHLD to the Madison Square Garden Co., which announced last month that it was exploring a split of its entertainment businesses and venues from its media and sports operations.