work in underwriting our original Sears investment.(13) The economic result of all this activity was a profit of $221 million.(14)

We probably would be better off had we not sold either of these positions. As I said in this letter last year, I believe Eddie Lampert will be successful with Sears Holdings, either by turning around the retailer or by realizing on its treasure trove of assets. But, our business franchise does not include speculating on non-control minority positions in common stocks and therefore our sale of this investment was appropriate.

We have, we do and we will make measured investments in private and public entities where we see value based on real estate. We consider the identification, underwriting, and implementation of such investments to be one of our core competencies.

We own a position representing 13.3 million shares of McDonald's Corporation. We guesstimate that McDonald's derives 80% of EBITDA (some $4 plus billion) from its real estate and brand (franchise) segments, and owns or longterm ground leases about 19,000 of its stores. Sounds like a lot of real estate to me, trading at a restaurant multiple and inefficiently structured to boot.

The report from Toys "R" Us is so far so good. We and our partners, Bain Capital and KKR, acquired Toys "R" Us in July 2005. Since then, we have recruited Jerry Storch as CEO and Clay Creasey as CFO. We have already refinanced $1.3 billion of acquisition debt at much better rates. The Christmas selling season exceeded our expectations, as did overall 2005 financial performance. While much is left to do, we are as optimistic today as when we started. Special thanks to Rick Markee, Vice Chairman and head of the fast growing Babies "R" Us division, for his service as interim CEO.