* HBC sells retail complex, Simpson's Tower for C$650
* HBC to lease back space, open 150,000-square-foot Saks
* Cash will go toward debt, growth initiatives, HBC says
By Susan Taylor
TORONTO, Jan 27 Hudson's Bay Co said on
Monday that it will sell its flagship downtown Toronto store and
neighboring office tower for C$650 million ($587.09 million) to
commercial real estate heavyweight Cadillac Fairview Corp and
open a full-line Saks store in the leased-back space.
The historic Canadian retailer has long floated plans to
unlock the value of its real estate but had previously given no
time frame. Its shares ended 1.2 percent higher at C$16.89 in
Toronto after spending most of the session in negative
"Investors are wondering are there still plans to go ahead
with the REIT (real estate investment trust), because obviously
there is a lot more substantial value underlying, in the
remaining real estate assets, than what we've seen them unlock
today," said Canaccord Genuity analyst Derek Dley.
"There's been a lot of waiting for an announcement on what
these guys were going to do with their real estate and we got a
little bit of something here today, but I do think there will be
more to come."
Hudson's Bay, which bought U.S. luxury chain Saks Inc for
$2.4 billion last year, said it will use cash from the sale of
its downtown Toronto retail complex and neighboring Simpson's
Tower to reduce debt and invest in growth initiatives.
"We continue to explore other options to create additional
value through the power and potential of our real estate
assets," Hudson's Bay Chief Executive Officer Richard Baker said
in a statement.
Baker was unavailable for an interview.
Hudson's Bay likely obtained a better price for the prime
real estate by selling it in a separate deal, rather than
incorporating it into a larger transaction, Dley said.
"I think the valuation they were able to get here was quite
good," he said.
Under the arrangement, Hudson's Bay will lease the space
back for 25 years, with renewal options for a term just under 50
years. It plans to open a 150,000 square-foot, multi-level Saks
in the fall of 2015, sharing space with the current Hudson's Bay
Saks has also agreed to lease space for a full-line store in
Toronto's Sherway Gardens mall under the arrangement.
Hudson's Bay, which traces its roots to the Canadian fur
trade in the late 1600s, operates The Bay and Home Outfitters in
Canada and Saks and Lord & Taylor in the United States.
It holds a lucrative real estate portfolio, including
properties on Fifth Avenue in Manhattan.
Baker said last summer that Hudson's Bay planned to create a
REIT, but sell only some of it to the public while keeping the
rest. "Real estate values dramatically improve in very well-run
operating companies," he told Reuters.
As of August, the company had more than 17 million square
feet of owned and ground leased properties from Hudson's Bay,
Lord & Taylor and Saks full-line stores, according to its
Details on Saks' Canadian launch come as rival Nordstrom Inc
prepares to open its first store in Canada this year,
setting the stage for a battle between two top U.S. luxury
chains in the heart of the country's most competitive retail
Nordstrom recently said it would open a flagship store in
Toronto's downtown Eaton Center in 2016, in space soon to be
freed up by Sears Canada Inc and just a stone's throw
from the planned Saks store on Toronto's Yonge Street shopping
Nordstrom will open its first Canadian store in Calgary this
fall and currently plans to open six Canadian full service
stores in all.
Canada is an attractive market for U.S. retailers looking
for growth because it has fewer shopping centers than in the
United States, less intense competition and relatively high
But Target Corp's troubled entry into Canada serves
as a cautionary tale, showing that it can be challenging to win
The No. 3 U.S. retailer recently said that poor sales at
Canadian stores will hurt results more than initially expected
after it had to slash prices to clear unsold merchandise.