It's no secret Macy's Inc (M  ) had its fair share of challenges in the last decade. Activist investor Barington Capital issued a press release on Monday urging the 166-year-old department store company to focus on its real estate portfolio while repurchasing shares.

The Press Release: Barington and Thor Equities's letter asks Macy's to form a separate real estate subsidiary to "optimize the value" of its holdings.

Barington and Thor estimate Macy's real estate to be worth between $5 billion and $9 billion. The current market capitalization of the company is $4.64 billion.

"We invested in Macy's because we believe the shares are mispriced relative to the upside potential we see in management's new strategic plan and the compelling value of the Company's owned real estate assets," Barington chairman James Mitarotonda said. "However, we are concerned with Macy's large capital expenditure programs."

Mitarotonda says Macy's should use its excess cash to return capital to shareholders instead of capital expenditures.

Why it Matters: Barington owns 650,000 shares of Macy's according to its most recent 13F filing, representing around 10% of its portfolio. Macy's has over 270 million shares outstanding.

Many analysts and shareholders have identified the New York-based company's value to be derived mostly from the underlying value of its valuable real estate. Macy's is commonly seen as a buy-out candidate for its real estate assets.

The department store operating model has struggled in recent years as e-commerce has risen in popularity.

Competitor Kohls Corp (KSS  ) has faced similar pressure to focus on the value of its real estate. The board of directors of the Menomonee Falls, Wisconsin-based company rejected a $53-per-share takeover bid in 2022. Its shares are now trading at $15.26, down nearly 50% since rejecting the offer.