Hudson's Bay said on Monday that it will sell its flagship downtown Toronto store and neighboring office tower for $587.09 million to commercial real estate heavyweight Cadillac Fairview and open a full-line Saks store in the leased-back space.
The historic Canadian retailer has long floated plans to unlock the value of its real estate but had previously given no time frame. Its shares ended 1.2 percent higher in Toronto after spending most of the session in negative territory.
"Investors are wondering are there still plans to go ahead with the REIT (real estate investment trust), because obviously there is a lot more substantial value underlying, in the remaining real estate assets, than what we've seen them unlock today," said Canaccord Genuity analyst Derek Dley.
"There's been a lot of waiting for an announcement on what these guys were going to do with their real estate, and we got a little bit of something here today, but I do think there will be more to come."
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Hudson's Bay, which bought U.S. luxury chain Saks Inc for $2.4 billion last year, said it will use cash from the sale of its downtown Toronto retail complex and neighboring Simpson's Tower to reduce debt and invest in growth initiatives.
"We continue to explore other options to create additional value through the power and potential of our real estate assets," Hudson's Bay Chief Executive Officer Richard Baker said, in a statement.
Baker was unavailable for an interview.
Hudson's Bay likely obtained a better price for the prime real estate by selling it in a separate deal, rather than incorporating it into a larger transaction, Dley said.
"I think the valuation they were able to get here was quite good," he said.