HBC, Simon Property form joint venture

Hudson’s Bay Company is forming two joint ventures valued at $4 billion as it aims to bring even more value its lucrative property portfolio.

The company has entered into agreements with Simon Property Group Inc. and RioCan Real Estate Investment Trust to form two joint ventures focused on real estate growth opportunities in the United States and Canada, respectively. These joint ventures will enable HBC to leverage the expertise of market leading real estate companies to build on the strength of its existing real estate assets and identify new real estate growth opportunities, the company said.

“By partnering with industry leaders, we have created two tremendous real estate vehicles for growth,” said Richard Baker, governor and executive chairman of Hudson’s Bay Company. “Importantly, we have retained the flexibility to create REITs at a future date of our choosing. We believe that the value of HBC’s total real estate portfolio is worth $9.2 billion, with approximately 90% of that estimate supported by these two transactions and the independent valuation commissioned by the lenders in connection with the November 2014 mortgage financing of the Saks Fifth Avenue flagship.”

The agreement represents the latest instance of separating real-estate assets from the operations of retail and restaurant chains. The transactions position HBC’s retail business for continued growth, the company said, while providing increased financial flexibility. The approximately $1.1 billion in expected cash proceeds from the joint venture transactions, net of expenses, will be used to reduce debt on HBC’s balance sheet, the company said.

“I am truly excited by these partnerships and what they mean for the future of HBC,” said Jerry Storch, CEO, Hudson’s Bay Company. “A stronger balance sheet and enhanced financial position will enable us to invest in growth initiatives across our retail business, including strengthening the connection between our store and digital businesses, expanding our off-price channel and investing in our world-class store base.”

“These transactions are another example of HBC opportunistically utilizing the Company's substantial real estate assets to surface shareholder value and strengthen our operating business,” said Paul Beesley, CFO. “They provide additional transparency enabling our shareholders to benefit from the recognition of the true value of Hudson’s Bay Company’s unique assets, including our two new joint ventures, the iconic Saks Fifth Avenue flagship and, our strong operating company and remaining real estate assets.”

Hudson's Bay Company has 90 full-line locations, two outlet stores and thebay.com and is the parent company of Sakes 5th Avenue and Lord & Taylor.