| TORONTO, June 13
TORONTO, June 13 Hudson's Bay Co could
face investor pressure to monetize a portion of its $10
billion-plus global real estate portfolio at the Canadian
retailer's annual shareholder meeting on Tuesday amid skepticism
that last week's restructuring plans aimed at saving $350
million will be insufficient to battle a tough real estate
The 347-year-old company, also known as HBC, announced job
cuts across North America on Thursday. It is the
latest department store chain to unveil plans to try to address
industry-wide turmoil amid intense competition in a saturated
HBC's real estate portfolio includes its Saks Fifth Avenue
flagship in New York, valued at $3.7 billion in 2014, and its
Lord & Taylor flagship, valued at $655 million in 2016. It also
has two joint ventures worth about C$6.1 billion ($4.6
billion)and C$2 billion. At the time these ventures were formed,
Chairman Richard Baker said the company might consider an
initial public offer at some point for the joint ventures.
Joshua Varghese, a portfolio manager with CI Investment,
said HBC's properties are considered higher-quality than those
of some competitors and that there is strong private-market
demand for good real estate. He said this suggests the company
could bring in another partner for its joint ventures as one
"I think there will be more pressure to extract value from
the real estate," said Varghese, whose firm is one of the
retailer's largest investors, with a stake of nearly 4.2
percent. "I'm not sure just yet if IPO-ing at this time is the
best way to do that."
Baker gave HBC's strongest signal in April about monetizing
real estate assets and reiterated the possibility in a call with
analysts on Friday, but conceded the timing for an IPO was
tougher than six months ago.
Industry analysts and consultants question the market
appetite for retail real estate assets in a rising interest-rate
environment and as more retailers close stores.
"The company had a short window to sell the real estate ...
But I think that barn door is closed," said Barry Schwartz, vice
president and portfolio manager at Baskin Financial Services.
Without other tenants, and with retail sales being weak, any
spinoffs of assets would be "done at fire sale prices," Schwartz
HBC is shedding 2,000 jobs, cutting its dividend by 75
percent, even as it continues to expand its global bricks and
mortar business with new stores and renovations and looks to
beef up online operations, where margins are tight.
Shareholder Varghese said HBC should consider closing
stores, but company executives have said there are no plans to
HBC, which also operates its namesake store in Canada and
Kaufhof in Europe, hopes the restructuring plan announced last
week will help mitigate some of the industry upheaval that has
hit U.S. retailers Nordstrom Inc and Macy's Inc .
"HBC ... must pull on its real estate levers now to preserve
equity value and reassure confidence in its investor base," said
M Partners Research analyst Steven Salz in a note to clients on
($1 = 1.3324 Canadian dollars)
(Editing by Matthew Lewis)