TORONTO, Canada — Hudson’s Bay Company, Canada’s oldest company, said it will sell its main store and adjoining office tower in downtown Toronto for C$650 million ($587.9 million) and turn part of it into a Saks Fifth Avenue luxury retail store.
An affiliate of Cadillac Fairview Corp., a Canadian real estate company owned by the Ontario Teachers Pension Plan Board, will buy the retail and office complex and rent it back to Hudson’s Bay for 25 years, Hudson’s Bay said in a statement today. The building is next to the Toronto Eaton Centre, a shopping mall and tourist attraction in downtown Toronto.
Toronto-based Hudson’s Bay said it will open a 150,000- square-foot (46,000-square-meter) Saks inside the current store in the fall of 2015. The announcement comes two weeks after Nordstrom Inc., another luxury retailer, said it would take over Sears Canada Inc.’s Eaton Centre location in 2016, the latest in a wave of U.S. retailers into Canada.
Proceeds of the deal, expected to close about Feb. 25, will be used to reduce debt and for growth, Hudson’s Bay said. Hudson’s Bay shares fell 2.1 percent to C$16.34 at 11:28 a.m. in Toronto.
“This sale-leaseback provides HBC with resources to deleverage and accelerate investment in our growth initiatives,” Hudson’s Bay Chief Executive Officer Richard Baker said in the statement. “We continue to explore other options to create additional value through the power and potential of our real estate assets.”
Saks has also agreed to lease space in Toronto’s Sherway Gardens for a full-line Saks store, according to the statement.
The two Saks stores announced today are the first of six or seven Hudson’s Bay said it would open after announcing it was buying the New York-based luxury retailer for $2.4 billion last July. The Toronto-based company, descended from a 350-year-old beaver pelt trading monopoly, also said it plans to open as many as 25 Saks Off 5th discount luxury stores.
Hudson’s Bay is facing pressure as Nordstrom, a high-end retailer based in Seattle, begins opening stores in major Canadian urban centers like Vancouver, Montreal and Calgary and as Target Corp. and Wal-Mart Stores Inc. expand in Canada.
Baker said in April the company was looking at following other Canadian retailers in creating a real estate investment trust. Sporting-goods retailer Canadian Tire Corp. last year raised C$263.5 million in an initial public offering after creating a REIT from about 72 percent of its real estate portfolio and grocer Loblaw Cos. raised C$400 million in its REIT offering.
By Gerrit De Vynck; Editors: Jacqueline Thorpe, David Scanlan