Hudson’s Bay Starts Joint Real Estate Ventures in U.S. and Canada

by MR Magazine Staff Feb 26, 2015

Hudson's Bay Company Hudson’s Bay has entered into two real estate joint ventures, one for the U.S. and one for Canada, in an effort to make money off existing property and acquire new property. Both new companies could be up for future initial public offerings.

In the U.S., HBC entered into an agreement with Simon Property Group valued at $1.8 billion and in Canada with RioCan Real Estate Investment Trust valued at C$2 billion ($1.6 billion).

HBC is using 42 of its U.S. properties (among them the Saks Fifth Avenue Beverly Hills flagship and the Lord & Taylor stores in Westchester and Manhasset, NY) for the joint venture with Simon. The JV will lease the properties back to HBC, which has an 80% stake. Simon gives $278.5 million for what will be a pro forma equity stake of 20%.

With RioCan, HBC will use ten Hudson’s Bay properties and RioCan gives C$325 million for a pro-forma equity stake of 20.2%.

“I am very pleased to announce that we have partnered with Simon and RioCan to create joint ventures with mandates to grow our real estate presence and strengthen our retail banners,” said HBC executive chairman and governor Richard Baker. “We believe that the value of HBC’s total real estate portfolio is worth C$9.2 billion, with approximately 90% of that estimate supported by these two transactions and the independent valuation commissioned by the lenders in connection with the November 2014 mortgage financing of the Saks Fifth Avenue flagship.”

HBC’s a $1.25 Billion mortgage on the ground floor of the Manhattan Saks Fifth Avenue flagship was just one way the company has been creative with its property.

In January 2014, HBC announced plans to sell its downtown Toronto property to a commercial real estate firm and lease it from them on a 25-year contract. “This sale-leaseback provides HBC with resources to deleverage and accelerate investment in our growth initiatives,” explained Baker at the time. “We continue to explore other options to create additional value through the power and potential of our real estate assets.”