Richard Baker Puts Focus on HBC’s Real Estate

It's a year after Hudson's Bay Co. bought Saks Fifth Avenue for $2.9 billion and HBC's chairman is still touting how great the deal was.

It’s a year after Hudson’s Bay Co. bought Saks Fifth Avenue for $2.9 billion and HBC’s chairman is still touting how great the deal was, particularly from the real estate perspective.

This story first appeared in the June 18, 2014 issue of WWD.  Subscribe Today.

“We believe Saks’ real estate is worth at least as much as we paid for the company,” Richard Baker, HBC’s chairman, said Tuesday at the retailer’s annual meeting in Toronto, where he hinted at the possibility of real estate sales in the future.

HBC’s property portfolio, Baker said, has “marquee assets attracting premium evaluations and easy to market or finance.…We are in the early stages of unlocking its value.”

Earlier this year, HBC agreed to sell its downtown Toronto Hudson’s Bay flagship and adjacent Simpson Tower office complex to Cadillac Fairview Corp. for 650 million Canadian dollars, or $598 million at current exchange, and lease back both properties. HBC will open a Saks store inside the Hudson’s Bay flagship.

“The sale leaseback in downtown Toronto gave a glimpse into the power of our assets,” Baker said at the annual meeting.

In 2008, Baker bought Hudson’s Bay for $1.1 billion. He later sold off most of the real estate of HBC’s Zellers chain to Target Corp. for $1.8 billion.

Baker has also been considering monetizing the real estate through a real estate investment trust.

The $7.6 billion HBC, which includes Saks Fifth Avenue, Off 5th outlets, Hudson’s Bay and Lord & Taylor, has about 32 million square feet of retail space, including 17 million square feet that is owned or ground leased.

According to filings, nine Saks stores are owned and 16 are ground leased. The largest owned Saks store is the Fifth Avenue flagship in Manhattan, which is valued at $1 billion. Other key owned Saks properties include stores in Beverly Hills, Chevy Chase, Md., and Bala Cynwyd, Pa.

HBC also owns the Lord & Taylor flagship on Fifth Avenue between 38th and 39th Streets, as well as 21 others with another 20 ground leased. Within the Hudson’s Bay chain, six units are owned and seven are ground leased.