ANALYSIS: WILL HBC SELL ITS CANADIAN FLAGSHIPS?
Hudson’s Bay Company (HBC) CEO Richard Baker indicates that he may sell some the company’s best stores. HBC owns several massive Canadian flagships, with a combined worth into the hundreds of millions of dollars. Similar to how the company recently sold its Toronto flagship, other Hudson’s Bay stores could be sold to adjacent mall landlords. Proceeds from these sales could renovate existing Hudson’s Bay stores, not to mention fund Saks Fifth Avenue‘s Canadian entry. We’ll provide an analysis of some top locations and what Richard Baker may have planned.
HBC set a precedent last January when it sold its 850,000 square foot Queen Street Toronto flagship (and adjacent office tower) toCadillac Fairview for $650 million. Cadillac Fairview, in turn, merged Hudson’s Bay with the Toronto Eaton Centre, creating Canada’s second-largest mall. Saks Fifth Avenue will occupy 150,000 square feet within the Hudson’s Bay building as a result, and similar deals could happen in other Canadian cities. We’ll discuss several of these, below.
Vancouver: Sources say that Downtown Vancouver’s Hudson’s Bay is a contender for a similar sale. The massive 637,000 square foot store, spanning eight floors, is already connected to neighbouring Pacific Centre via an underground passage. Pacific Centre’s landlord, Cadillac Fairview, could be open to a deal since it’s the same landlord that spearheaded the purchase of Hudson’s Bay’s Toronto store. Saks Fifth Avenue could occupy up to 150,000 of Downtown Vancouver’s Hudson’s Bay, though details of Vancouver’s Saks store have yet to be bee finalized. Rumour has it that Saks could also open in a suburban Vancouver mall, as well, and we’ll update you when we learn more.
Calgary: Downtown Calgary’s 450,000 square foot Hudson’s Bay flagship is attached to the Scotia Centre. Selling this store could provide HBC with necessary funds for a store renovation, not to mention the addition of Saks Fifth Avenue within the same building. Downtown Calgary already has one large luxury retailer, a 147,000 square foot Holt Renfrew store, located two blocks west. Sources can’t confirm if Saks will open in Calgary though if it does, we’d expect either a Downtown location within Hudson’s Bay, or a free-standing store at Chinook Centre.
Ottawa: Hudson’s Bay’s 335,000 square foot Ottawa store is located across the street from Cadillac Fairview-owned Rideau Centre. Similar to what it did in Toronto, Cadillac Fairview could purchase Hudson’s Bay and join it to the Rideau Centre. Although analysts suspect that Saks won’t open in the city, an Ottawa store could be a strategic move for Saks. Ottawa is affluent and growing, and we’re not aware of any expansion or relocation plans for its tiny Holt Renfrew store. A Rideau Centre Saks could see synergies with the mall’s new 157,000 square foot Nordstrom store, its new La Maison Simons store, and its new flagship Harry Rosen menswear store, all opening within the next two years.
Montreal: Montreal’s 655,000 square foot Hudson’s Bay flagship is connected underground to Oxford Properties-managedPromenades Cathedrale. HBC indicates that Saks will open at least one store in Montreal. Selling this store could raise much needed funds for its renovation, not to mention spearheading a large Saks shop-in-store.
Winnipeg: Hudson’s Bay’s massive Downtown Winnipeg flagship is another story entirely. The 656,000 square foot building is heritage protected, rendering it essentially a white elephant. The store underperforms, with less than 240,000 square feet currently in use. Sources say that the store is a liability and that HBC wants to offload it, with recent attempts to transfer ownership of the buildingto the Manitoba government in exchange for tax benefits.
Unlocking the value in HBC’s Canadian real estate could vastly improve company cash coffers. Its most valuable real estate asset, however, isn’t one of its Canadian stores. HBC owns Saks Fifth Avenue’s 646,000 square foot Manhattan flagship, valued at about $1 billion. Richard Baker reportedly refers to it as the company’s ‘crown jewel’. We think it and other HBC properties will eventually be sold either via a REIT, or individually.