TORONTO, Canada — A joint venture between Hudson's Bay Company and RioCan REIT is exploring the sale of HBC's flagship store in downtown Vancouver, the companies said Monday, stepping up efforts to extract value from the department store owner's substantial real estate holdings.

Hudson's Bay, which owns Saks Fifth Avenue and Lord & Taylor, would lease back space in the property if it is sold, and continue to operate the store, according to a statement from both companies.

The announcement follows HBC's agreement last week to sell its Lord & Taylor building on New York's Fifth Avenue to WeWork Companies Inc for $850 million, a 30 percent premium to its last appraised value.

HBC is battling an industry-wide slump for department store operators and has announced job cuts as it struggles to turn around sales.

RioCan is unlikely to buy HBC's share of the building, a person familiar with the matter told Reuters, as the property is too big and would leave the Canadian real estate trust too exposed to a single tenant.

Sales of other properties in the joint venture could follow if the Vancouver store divestment is successful, said the person, who was not authorised to publicly talk about the deal.

RioCan did not immediately respond to Reuters' request for comment.

The companies did not disclose the value of the property, but the Globe and Mail newspaper on Friday reported the store was valued at as much as C$900 million ($701 million).

HBC executive chairman Richard Baker and activist investor Jonathan Litt have butted heads on the future of North America's oldest company.

Litt, founder of hedge fund Land & Buildings, has valued HBC's real estate at C$35 ($27) a share, and has called for the company to sell some stores, convert them to alternate uses or go private. He called for a special shareholder meeting to potentially remove some directors earlier this month.

HBC shares closed up 1.3 percent at C$11.18 ($8.70). RioCan shares fell 1.3 percent to C$24.42 ($19.02), while the benchmark Toronto stock benchmark rose 0.3 percent.

The companies are also taking out a C$200 million ($156 million), four-year mortgage on the Vancouver property, the proceeds of which would be distributed to the joint venture partners. The loan has no prepayment penalty if the property is sold, according to the statement.

CBRE and Brookfield Financial Real Estate Group have been engaged to explore the possible sale, according to the statement.

By Nichola Saminather; editor: Lisa Shumaker.