U.S. investor urges HBC to cash in 'crown jewels,' even if it means closing stores
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TORONTO — Shares in Hudson's Bay Co. (TSX:HBC) soared more than 13 per cent Monday amid news that it's facing investor pressure to unlock value from its real estate assets, even if that means closing its "crown jewel" locations.
Land & Buildings Investment Management of Stamford, Conn., said in a public letter that HBC's Saks Fifth Avenue store in Manhattan, New York, is worth more than the company as a whole at current stock prices.
It estimates that the Saks flagship location would be worth C$16 per share, after debt, compared with HBC's recent stock price of C$8.88 at the close of trading on Friday. The company has said in the past that the building is worth US$3.7 billion.
The Toronto-based company's shares gained $1.21 to $10.09 on the Toronto Stock Exchange by mid-Monday.
Land & Buildings says HBC's management has many options, including going private or redeveloping its properties in Canada, Europe and the United States.
But it urges HBC to abandon attempts to buy additional retail brands, such as Neiman Marcus or Macy's.
"Hudson's Bay is a real estate company, full stop. If there is a smarter and better use of any or all of the locations, stores should be closed and redeveloped and put towards their optimal use," the letter says.
Toronto-based Hudson's Bay Co. says it's reviewing the letter and will respond later.
Last week, at the company's annual general meeting, HBC chairman Richard Baker said that the company "will continue to strive to highlight the value" of its real estate assets, whether that be a sale or potentially engaging in a public listing.
Baker cautioned, though, that a decision would only be made with the consideration of current market conditions.
Land & Buildings Investment Management — which now owns about 4.3 per cent of Hudson's Bay equity — says in its letter to HBC's board that the "jury is still out" on Baker, given that the company's shares peaked two years ago at $28.80.
At the time, HBC was in the midst of forging major real estate joint ventures with Toronto-based RioCan and Simon Properties of Indianapolis. It had also announced plans to acquire German department store chain Galerie Kaufhof.