What’s Hudson’s Bay Co.’s plan for maximizing its real estate?
In response to concerns voiced by two shareholders during HBC’s annual meeting in Toronto on Tuesday, Richard Baker, governor and executive chairman, said the “general focus” is finding different ways to convert space into new uses, like what’s being done on two levels of the Hudson’s Bay flagship on Queen Street in Toronto.
“We have a tremendous portfolio around the world with tremendous real estate,” Baker said at the meeting. “In Toronto, as well as other major cities, we are working on deals with a variety of users, whether it’s Topshop, health clubs or in Toronto with WeWork.”
“If you go up to the seventh and eighth floors [of the Toronto flagship] they’re vacated,” Baker said. “We pushed the goods on those floors down in the building, so we will lose no sales and free up 100,000 square feet of prime space in the middle of Toronto.” (Lingerie, kids’ wear and home items were relocated.)
Baker’s comments came during the Q&A session of the meeting, when two shareholders raised questions about HBC’s real estate strategy, including one who contended that HBC wasn’t acting fast enough to capitalize on its real estate and should build condos on its Toronto property.
HBC leased back its Queen Street flagship from Cadillac Fairview, which bought the property for $650 million in 2014.
The seventh and eighth floors of the Queen Street flagship, Baker said, commands greater than $50 a foot to reuse the space, and had previously been pegged at $7 or $8 a foot.
With WeWork taking the two floors, several thousand people a day will be going through the building, Baker said. The plan for that flagship, Baker said, reflects “our general focus around the world is to better utilize existing space rather than selling off particular pieces.”
HBC is selling its Lord & Taylor flagship on Fifth Avenue in Manhattan for $850 million to WeWork Property Advisors, a joint venture between WeWork and Rhône Capital, a private equity firm, which also agreed to make a $500 million equity investment in HBC. The entire L&T flagship will shut down later this year. The deal with WeWork is expected to be completed later this year. WeWork is expected to create a new complex on the lower levels that could include retail, food and beverage.
HBC is also seeking to sell its Hudson’s Bay flagship in Vancouver but plans to lease it back.
Helena Foulkes, HBC’s chief executive officer, said recent actions to divest Gilt and right-size Lord & Taylor “shows we are serious about improving results. The team and I are committed to making tough decisions.”