- The activist investor pressing Hudson’s Bay to sell off its most prized real estate holdings has won the support of some additional investors, Reuters reports.
- After Jonathan Litt’s Land & Buildings fund announced a 4.3% stake in June, four shareholders representing more than 7% ownership of the Canadian department store retailer have told Reuters they support Litt’s plan for Hudson’s Bay to aggressively sell off its owned real estate. One investor, Jonathan Norwood of Mackenzie Investment, told Reuters outright he thought the company should focus on its real estate over its retail operations.
- Litt suggested in a June letter that Hudson’s Bay, which owns U.S. department stores Saks Fifth Avenue, Saks off 5th and Lord & Taylor, should more quickly monetize its owned real estate, including the company’s iconic Saks Fifth Avenue property.
The pressure is building on Hudson’s Bay to cash in on its real estate, after the company had already taken significant steps in that direction by spinning off many of its properties into joint ventures the company could be monetized through an IPO.
But that’s not enough for Litt, who said in his June letter he considered Hudson’s Bay as “a real estate company, full stop” that should sell off even its “crown jewels” — including the famous Manhattan property.
Litt and his new followers among the retailer’s investors are part of a growing tradition among Wall Street activists who want to see the owned property of retailers reflected in the company’s share price, and ultimately passed on to shareholders.
But retailers who own their property do so for a reason. It creates certainty in their geographic footprint, stability in their balance sheets and improves their credit ratings, making it easier to borrow when they need to invest in their operations, and also keep their debt and interest burdens lower so they can navigate tough markets — an important advantage these days.
Macy’s, as one example, recently fended off Starboard Value, which had similar plans for that department store retailer as Litt does for Hudson's Bay. But Starboard ultimately sold off its stake in frustration as Macy's, instead of spinning off its real estate en masse, decided to take a slower, more nuanced approach.
Some outside Wall Street also think now is the time for retailers, especially department stores, to sell off real estate assets, before the market continues to decline.
“Astute investors realize that the entire department store industry, save for a few higher end stores like Nordstrom and Neiman Marcus, is in its last phase of relevancy," Nick Egelanian, president of retail development consultants SiteWorks International, said in an email to Retail Dive in June, after Land & Buildings announced its stake in Hudson’s Bay.
"Total industry volume is down to a mere $70 billion in the U.S. and declines continue with accelerating store closures,” Egelanian added. “Hudson’s Bay is real estate rich, especially with its acquisitions in recent years. The most logical thing to do in this situation is to try to extract the most value possible from the department store real estate it owns.”