Hudson’s Bay in joint ventures with Simon Property, RioCan

Toronto -- Canadian retail giant Hudson’s Bay Co. (HBC) has entered into two blockbuster deals, forming joint ventures with Simon Property Group and Canada’s RioCan Real Estate Investment Trust to target real estate growth opportunities in the United States and Canada. Both ventures are structured to facilitate an IPO at a later date.



The partnerships, which combined are valued at about $3.4 billion at the current exchange, are the latest example of retail companies moving to leverage their valuable real estate assets.



"I am very pleased to announce that we have partnered with Simon and RioCan to create joint ventures with mandates to grow our real estate presence and strengthen our retail banners," said Richard Baker, governor and executive chairman of Hudson's Bay Company. "By partnering with industry leaders, we have created two tremendous real estate vehicles for growth. Importantly, we have retained the flexibility to create REITs at a future date of our choosing.”



Under the agreement with Simon, HBC, whose banners include Hudson's Bay, Lord & Taylor and Saks Fifth Avenue, will contribute 42 properties to the venture, including the Saks Fifth Avenue Beverly Hills flagship and the Westchester and Manhasset Lord & Taylor stores. (Not included is the Saks’ Manhattan flagship, whose latest appraisal puts its value at a whopping $3.7 billion.) The joint venture will then lease back the properties under triple-net operating leases to HBC.



Simon will contribute as much as $278.5 million for a 20% stake in the venture. It will also provide $100 million for assistance in upgrades to the HBC properties included in the joint venture.



“In HBC, we have found a unique partner with a proven track record of creating value from retail properties, as well as a strong portfolio of banners that serve as attractive tenants for a range of retail opportunities,” said David Simon, chairman and CEO of Simon. “Together, we will leverage our combined expertise to significantly expand and diversify the joint venture assets and increase its value for the benefit of our two companies and our shareholders.”



The venture with RioCan will include 10 owned or ground-leased Hudson's Bay properties, including stores in Vancouver, Calgary, Ottawa and Montreal. RioCan will contribute approximately C$325 million and receive a pro-forma equity stake of 20.2%.