"This is a great business, a great retailer and a great management team," Ackman said. "I'd much rather own the land under Target than some of the paper issued by the US government. TIP REIT will have better and cheaper access to capital than any other retailer and any REIT."

That's because there is a second company behind the numbers, he added. The chain, which now has 1,685 stores, still has significant growth potential. Pershing Square has estimated that its real estate and buildings are worth about $39 billion. More traditional ways to unlock that value each had disadvantages: a tax-free spinoff of the land and buildings would mean the retailer would lose control of the stores. A taxable spinoff or sale-leaseback would create onerous tax burdens. The proposed structure frees the retailer from capital expenditure costs, while allowing Target the flexibility to close, re-lease or remodel stores.

"If the company had this entity in place, they could accelerate their growth," rather than being tied to capital markets affecting both retailer and landlord financing, Ackman said.