Sears, Roebuck & Co. (S) shares jumped as much as 25 percent on Friday after real estate company Vornado Realty Trust (VNO) said it raised its stake in the retailer, a step that could lead Sears to convert some of its real estate assets into cash.

Vornado said in a regulatory filing that it acquired 7.9 million shares and options in Sears for about $315 million, giving it a 4.3-percent stake in the retailer when combined with an earlier 1.17 million stake it purchased in July and August.

Analysts have argued recently that many retailers have untapped value in their real estate, implying that such stocks should have a higher value.

"Vornado is a real estate company that has a long history of making investments in retail companies, because it believes there's an opportunity to realize some of the value in the real estate," said Louis Taylor, senior real estate analyst at Deutsche Bank.

Sears' stock rose as high as $46.90, gaining more than 25 percent, on the New York Stock Exchange (search). Vornado's shares, which also trade on the NYSE. fell 78 cents, or 1.13 percent, to $68.47.

Paramus, N.J.-based Vornado, which owns more than 20 New York City office buildings, said in a regulatory filing that it gained its latest stake via a series of privately negotiated transactions with one financial institution in August and September at an average price of $39.82 per share.

Vornado didn't disclose who sold the Sears stock, and it declined to elaborate any further about the transaction. Sears, based in Hoffman Estates, Illinois, said in a statement: "We are pleased that Vornado sees value in our stock."

Its spokesman declined to comment on whether Vornado has had discussions with Sears management about the value of the retailer's real estate.

In July, Deutsche did a study looking at the real estate value of 37 retailers, which showed that Sears' stock price was well below its net asset value. Taylor said retailers often need partners to help them recognize the value of their real estate holdings.

Deutsche analyst Bill Dreher said Friday the study showed Sears had a net asset value of between $36 and $67 share, with a midpoint of $57. It appears Vornado sees that real estate value, added Dreher, who has a "buy" rating on Sears shares.

Others named in the research note include Dillard's Inc. (DDS), Saks Inc. (SKS), ShopKo Stores Inc. (SKO), Winn-Dixie Stores Inc. (WIN), Federated Department Stores Inc. (FD) and Toys R Us Inc. (TOY). These shares also registered sharp gains on the NYSE following the Sears/Vornado news.

The same report said Kmart Holdings Corp.'s (KMRT) retail estate could be worth as much as $150 per share, a finding that came as the No. 3 U.S. discount retailer pushed ahead with a sale of a dozen of its stores.

Kmart's largest shareholder, Chairman Eddie Lampert, is also Sears largest shareholder. Under Lampert, Kmart has sold more than 72 stores to raise cash, with Sears buying many of those to push ahead with a new off-mall growth strategy.

As of year-end 2003, Sears owned about 60 percent of its 870 mall-based, full-line stores, a spokesman said. Including specialty stores, Sears owns about 46 percent of its full-line and specialty stores and also has several hundred dealer stores which it does not own and have independent operators.

Sears stores could be valuable real estate because they were in attractive locations and could be broken up into smaller retail spaces that rent for more per-square foot, said Joel Bayer, chief investment officer at General Growth Properties, the second largest U.S. mall REIT owner.