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McDonald's investor wants real estate spinoff CHICAGO (AP)  A hedge-fund investor with a substantial stake in McDonald's (MCD) went public Tuesday with his proposal for a shake-up to wring more value out of the company's real estate, contending it could drive up the stock price as much as 50% within six months. In a presentation aimed at showing Wall Street how much the fast-food company's stock is undervalued, William Ackman, managing partner of Pershing Square Capital Management, said McDonald's should spin off 65% of the 8,000 restaurants it owns and borrow $14.7 billion against its real estate to buy back shares. The chain owns 37% of the land beneath the more than 30,000 McDonald's restaurants worldwide. The moves, he told a New York investment conference, would help push McDonald's stock up to $45 to $50 a share and improve management focus and incentives at both the real estate-centered McDonald's and the new restaurant-based unit. Pershing bought a 4.9% stake in McDonald's in September, although Ackman acknowledged after the presentation that "almost our entire position" is in options, not shares. The purchase stirred widespread speculation about a possible McDonald's spinoff in light of Ackman's similar move this year at Wendy's International (WEN), where he bought a stake and nudged management to sell real estate and spin off its Tim Hortons coffee-and-doughnut chain. McDonald's has said repeatedly this fall that it is not interested in a corporate restructuring such as the one Ackman suggested. It maintains the move would be expensive and time-consuming and give it less control over its restaurants. McDonald's President and Chief Operating Officer Mike Roberts on Tuesday rejected the spinoff proposal. Roberts told Reuters at an event to promote the company's world children's day that the proposal offers "no significant shareholder value" and added: "It is our view and the collective view of all the advisers that we surrounded ourselves with that this speaks of more financial engineering." Despite their differences, Ackman praised the company's management. "This is not a case at all where we think McDonald's is doing a bad job," Ackman said in an hourlong speech to the Value Investing Congress that was accompanied by slides and broadcast on the Internet. "Quite the opposite — we like management." He called McDonald's "a very shareholder-friendly company. ... So far we just haven't gotten the right idea, but we're getting close." Backing from other institutional investors would give Ackman's effort more clout with McDonald's. Already, Vornado Realty Trust has bought a 1.2% stake in McDonald's since the Pershing investment and Deutsche Bank has increased its holdings to 3.2%, according to SEC filings. Leon Cooperman, who runs the $4 billion-plus Omega Fund, attended the conference and called Ackman's proposal "very impressive." Ackman said that despite the "fundamental misperception" that McDonald's is a restaurant company that owns a lot of real estate, "the truth is actually slightly different." Nearly 90% of its economic earnings — excluding rent, fees and other items — come from real estate, he said. Getting McDonald's management out of the business of running restaurants would shed a low-margin, capital-intensive unit and enable it to focus on getting better results from franchisees, who already own a majority of the outlets, Ackman said. Asked by reporters afterward if he might make the effort hostile if McDonald's doesn't cooperate, he said: "I'm the most persistent person you will ever meet, particularly when I believe I'm right. That said, I don't think this will ever go to a proxy battle. I'm a huge believer in the power of our ideas." He called the presentation "Step 1 as far as letting people know what we're thinking." Contributing: Reuters Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.