- Hudson's Bay Company is looking to sell another iconic property — this one the flagship for the department store retailer's namesake brand in downtown Vancouver, according to a press release. Hudson's Bay Governor and interim CEO Richard Baker said in a statement, "We are committed to operating our Hudson's Bay store at this location and any possible sale would include the continued operation of Hudson's Bay at this property."
- The property could sell for as much as $900 million, according to the Globe & Mail. The building — six stories and 650,000 square feet — was built in 1927, spans a city block and is among the largest and most prominent buildings in Vancouver, according to the Daily Hive. The move follows last week's announcement that Hudson's Bay was selling its Lord & Taylor flagship building in Manhattan to WeWork.
- Hudson's Bay is working with its partner, RioCan Real Estate Investment Trust, on the sale through their joint venture created for the purpose of monetizing Hudson's Bay's real estate holdings. The joint venture has engaged CBRE and Brookfield Financial Real Estate Group to explore a sale and has also recently closed on a four-year, $200 million mortgage on the property. Money from the mortgage will go to the joint venture partners.
Hudson's Bay has been busy. In the past week it has announced a property sale and a possible sale, which together could be worth nearly $1.8 billion. It's sold a $500 million stake in itself to investment firm Rhône Capital and it's also searching for a new CEO after the abrupt departure of Jerry Storch, who plans to leave in November to return to his advisory firm, Storch Advisors.
Through the property deals, the retailer, which also owns Saks and Lord & Taylor along with its namesake stores, has shown its willingness to placate the activists agitating for the company to cash in on its real estate holdings. Under the deal for the New York Lord & Taylor property, worth $850 million and expected to close next year, the Lord & Taylor store will operate in the space through the 2018 holiday season, after which time WeWork plans to build its New York headquarters in the space. Then, Lord & Taylor will take over a much smaller store (about 150,000 square feet). Hudson's Bay also plans to start leasing some space in its department stores to WeWork, in an effort to make those properties more productive.
Hudson's Bay said that ceding that space should have minimal effect on its earnings, and the retailer noted the store is less productive than its Manhattan Saks store, also the subject of activist pressure.
Investment firm Land & Buildings, owner of a 4.3% stake in Hudson's Bay, and its founder Jonathan Litt, are pushing the retailer to sell the property, which Litt calls a "crown jewel." Litt wrote earlier this year that the property was worth around $4 billion.
Litt and his fund have not relented in their pressure on Hudson's Bay so far. After the retailer announced Storch's departure in October, Land & Buildings described the c-suite shake up in a press release as a "consolidation of power" on Baker's part that underscored "the board's attempt to buy time and placate investors to address underperformance and undervaluation."
"[I]t is typical for undervalued and struggling companies such as Hudson's Bay to try to position the exit of top executives as a reason for investors to give them more time to right the ship," Land & Buildings said. "Jerry Storch is only the most recent casualty at the company, joining several other senior executive departures," including CFO Paul Beesley and Brian Pall, former president of HBC Real Estate.
Land & Buildings added at the time that it had no confidence in the board and planned to call a special meeting of investors. At the meeting, it plans to release proposals for Hudson's Bay, which could include removal of directors, Land & Buildings said.
Owned property is a common target for activist investors who buy into retailers. Where retailers see stable balance sheets and operational control in property ownership, hedge funds often see valuable assets that can be sold for cash and passed along to investors. By creating joint ventures for its properties, Hudson's Bay has already moved further and faster in monetizing its real estate than fellow department store operator Macy's. Activist hedge fund Starboard Value in May dropped its stake in Macy's after losing patience with management's more cautious and meticulous approach to its portfolio.