The Hudson’s Bay flagship in Vancouver could be worth $900 million Canadian, according to Land & Buildings Investment Management founder and chief investment officer Jonathan Litt, who cited the figure in a letter Tuesday.
The activist investor has been pressuring Hudson’s Bay Co. to sell off real estate to unlock shareholder value. “Hudson’s Bay world-class real estate is valued at 31 Canadian dollars per share — as the company disclosed in April — yet it is trading at 10 Canadian dollars per share,” Litt wrote. “HBC’s third-quarter earnings disappointment, which management admitted, “did not meet our expectations,” gives us more reason to view and value HBC as a real estate company.”
“High-quality retail real estate is in high demand,” Litt said, citing Unibail-Rodamco’s purchase of Westfield Corp. for $25 billion, and HBC’s selling its Lord & Taylor flagship to WeWork Companies, the office sharing company, for $850 million. The Lord & Taylor flagship will continue in the entire building through the 2018 holiday season and then downsize to 150,000 square feet. The site will serve as the New York headquarters for WeWork. That deal was designed to help HBC pay off debt, improve the balance sheet and increase shareholder value.
Litt also wrote that HBC’s non-management board members are evaluating a sale of HBC’s European business, which includes Galeria Kaufhof in Germany and Galeria Inno in Belgium. Litt said a deal could net C$5.20 per share in cash. About six weeks ago, HBC received an unsolicited offer from, Signa, Austria’s largest privately owned real estate company, to purchase HBC’s European business. Signa owns the Karstadt department store chain in Germany, Kaufhof’s primary competitor.
With Rhône Capital recently making an equity investment of $500 million in HBC, representing a 21.8 percent stake in the retailer, and WeWork buying the L&T flagship, Rhone’s Steven Langman and WeWork’s Eric Gross are now on the board of HBC. “What we see as the value opportunity deal they made with HBC, given their track records as value buyers, suggests they see a clear path to maximizing the value of HBC,” Litt said.
An HBC spokeswoman had no comment on the Vancouver flagship’s worth. The property, at Granville and West Georgia Streets, is part of a joint venture between Hudson’s Bay Co. and RioCan Real Estate Investment Trust. HBC would still operate the store after a sale.
On HBC in Europe, the spokeswoman said, “As we’ve previously stated, our European business is an important element of the company’s strategy.” She also referred to a past statement that read: “Consistent with its fiduciary responsibility, the board intends to review the offer in due course, and cautions that the offer is subject to many assumptions, conditions and contingencies.”