Hudson’s Bay strikes JV agreements with Simon Property Group, RioCan

After receiving one of the most acclaimed loans of 2014 at Saks Fifth Avenue, Hudson’s Bay Company is forming two joint ventures that are structured to facilitate IPOs and free up cash to grow its portfolio.

After receiving one of the most acclaimed US financings of 2014 at Saks Fifth Avenue, Hudson’s Bay Company is forming two joint ventures that are structured to facilitate IPOs and free up more cash to grow its portfolio.

Richard Baker
Richard Baker

Under separate agreements with REIT giants Simon Property Group and Canada’s RioCan, the Canadian retail business group will lease out 52 properties totaling nearly 8.7m sq ft.

In the latest instance of a retail group isolating its assets from its operations to free up funds, HBC expects C$1.1bn ($880m) in cash proceeds from the joint ventures, which it said will be used to reduce balance sheet debt and help grow its portfolio.

Based on the joint ventures’ value of C$4.2bn ($3.36bn), the firm’s management team has valued its entire portfolio at more than C$9.2bn ($7.38bn), with half of that attributed to the Saks Fifth Avenue flagship in New York (see chart).

HBC breaks down its value (click to expand)
HBC values its assets (click to expand)

In December HBC received a $1.25bn, 20-year, fixed-rate loan led by Bank of America to refinance the flagship Saks location. CEO Richard Baker hinted at the time that the financing gave the firm the ability to sell the asset “into a REIT or secure additional leverage on the leasehold interest.” But today the firm confirmed that the Saks flagship will not be impacted by the joint ventures.

HBC will however contribute 42 owned or ground-leased properties to the Simon joint venture (5.4m sq ft), including the firm’s Saks Fifth Avenue Beverly Hills location in California, and two Lord & Taylor stores in New York suburbs.

The firm will also contribute 10 properties (3.3m sq ft) to the RioCan joint venture, including flagship properties in downtown Vancouver, Calgary, Ottawa, and Montreal. Average lease terms will be 20 years, plus renewal options.

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