A report from the Wall Street Journal revealed Macy's (M) is considering a buyout offer from real estate investor Arkhouse Management and asset manager Brigade Capital Management worth $5.8 billion. While brick and mortar retail stores have faced an uphill battle in recent years, at the center of interest for most investors is Macy's real estate portfolio, which contains the crown jewel, New York City's iconic Herald Square location. Triangle Capital Co-Founder and Partner Richard Kestenbaum joins Yahoo Finance to discuss the potential buyout and Macy's real estate portfolio.

Kestenbaum explains that since department stores have struggled, investors have taken a different approach, looking at the whole portfolio of departments stores, and ask "how do we make this investment worthwhile?"

Click here to watch the full interview on the Yahoo Finance YouTube page or you can watch this full episode of Yahoo Finance Live here.

Video Transcript

- An investor group has put forth a $5.8 billion bid for department store chain Macy's. Perhaps the most notable asset the company holds, its sizable real estate portfolio. Between the Macy's brand Bloomingdale's and Bluemercury, Macy's operates more than 700 locations, including its iconic Herald Square location. So where can the retailer win with its portfolio?

We want to bring in Richard Kestenbaum, Triangle Capital co-founder and partner. So Richard, thanks so much for joining us. When you think about this deal, what does this tell you about where Macy's is in terms of the retail space?

RICHARD KESTENBAUM: Well, the consumer is changing. And consumers don't want to shop where their parents shopped. They want new venues. And that's been very challenging for the department store business. And so what you see is other people taking a different look at the assets of department stores and trying to figure out, how do we make this investment worthwhile?

That may not mean that they grow or have a new formula for the department store business, as you guys have been very well describing, they may have a different strategy for the future of the brand. They haven't told us what that is. But it seems likely that that's the case.

- Can we ask about valuation here? $5.8 billion. I've heard rumblings among various analysts that the numbers a little bit low and we don't just yet. But it appears as though the buyer the Investment Group could be willing to pay a little bit more. What are your thoughts on this? What do you think in terms of the valuation? What does this deal look like?

RICHARD KESTENBAUM: I think they've come in with a premium that's not exceptionally high. And I would not be surprised if the bid goes up before it's over, if it does go forward, or that someone else comes in and makes a higher bid.

- If someone else comes in-- who could potentially come in as say, even a dark horse bid, Richard?

RICHARD KESTENBAUM: Well, in most industries, you'd be looking for someone strategic. I would not expect that here. I think anybody who's in or knows the department store business has their hands full. And I'd expect another financial bidder, if there is going to be another bidder. I'm not saying that there is. But if there is, I would expect it to be another financial bidder.

- Are we just witnessing the ignominious decline of retail and-- or department store traditional brick and mortar retail and this is kind of one of the last gasps? How do you see this transaction fitting in with the broader trends within the real estate and department store landscape?

RICHARD KESTENBAUM: I think, Jared, it's not unlike your business. And what I mean by that is, 20 years ago, we saw financial bidders buying up newspapers. That didn't mean the end of journalism, here you are. But it did mean the decline of a certain way of conducting news and media that changed over time. And we're seeing that in retail. And when financial buyers come in, it's an outsider's view that allows changes to accelerate as we saw in the media business.