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HBC Shareholder: Sell Saks, Focus on Canadian Business

Shareholders at retail firms have been outspoken lately, and none more so than Land & Buildings Investment Management, which owns about 5 percent of Hudson’s Bay Company.

The investment firm has made another appeal to the Canadian company’s board, demanding that it mine the value of its real estate or else, according to Bloomberg.

“If we do not see substantive progress on a plan to close the gap to underlying asset value, Land and Buildings may be left with no choice but to call a special meeting of shareholders to remove directors,” Jonathan Litt, chief investment officer of Land & Buildings, is quoted as saying in a letter to the HBC board.

Of the options Litt presented, one is for Hudson’s Bay to give up on Europe and unload Saks Fifth Avenue—which he said would likely be in “high demand”—to focus on it’s strength, which is the Canadian market.

[Read more about how retailers are trying to capitalize on brick-and-mortar: Physical Stores: Albatross or Asset?]

This latest agitation follows Land & Buildings’ public letter last month, which called on HBC to finally see the light and give up retail in favor of monetizing its real estate. At the time, Litt highlighted Saks as well, theorizing that it could be worth a lot more if it were redeveloped into a hotel or an office or at the very least, a more profitable retail venture like an Apple store.

In this appeal, Litt suggested similar ideas for the joint ventures HBC has with Simon Property Group and RioCan Real Estate Investment Trust. Finally, he said the company should consider going private in a management-led buyout.

In response, HBC issued a statement to the publication saying it is committed to listening to feedback, operating its retail chains and “creatively unlocking the value of our associated real estate holdings.”

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“We continue to transform our business to optimize performance and pursue growth in North America and Europe,” Hudson’s Bay continued. “Meanwhile, HBC has a strong history of successfully realizing underlying value of the company’s real estate assets, and has generated more than $3 billion in cash proceeds through these efforts. We are constantly evaluating additional opportunities to continue this track record of significant value creation.”

As footfall plummets and earnings reports continue to show unfavorable sales trends, HBC is not the only department store to be faced with opposition like this. A disagreement over how to handle its real estate holdings put Macy’s at odds with Starboard Value, which ultimately sold its company stock after the retailer resisted offloading more of its property. More recently, Dillard’s investor Snow Park Capital Partners is leading the call for that chain to liquidate its real estate holdings.