HBC shareholders show support for activist push

Several Hudson’s Bay Company shareholders are backing an activist’s call to unlock value in the retailer’s estimated $10 billion-plus real estate portfolio, piling pressure on the company to act swiftly to consider its options.

Activist investor Jonathan Litt and his company Land & Buildings, who last month disclosed a 4.3-per-cent stake in HBC, called the Saks Fifth Avenue owner “a real estate company, full stop,” asking the company board in a June letter to consider monetizing or repurposing its real estate, shuttering stores, or taking the company private.

Four shareholders, who jointly own more than seven per cent of HBC and include two top-10 investors in terms of percentage of holdings, told Reuters they support Litt’s efforts. But a fifth investor with about a 1.4 per cent holding supported the board, saying it does not need an activist investor to push it. About 50 per cent of HBC shares are held by insiders and investors close to the company.

Litt’s efforts could force HBC to shift its focus away from retail and more into real estate, the area where Richard Baker, the architect behind taking the company public in 2012, made his name.

Many of Litt’s supporters say they bought into HBC for its premium real estate holdings, which include two iconic Fifth Avenue buildings in New York City with a combined 1.33 million square feet of space and a total appraised value close to $4.4 billion. HBC also holds majority stakes in two joint ventures for its other global properties.

The push from Litt taps into shareholder frustration over the company’s share price not reflecting the value of its real estate holdings, and comes at a time when it is struggling to revive sales amid a fundamental downturn in the broader retail industry. Department stores, with their cavernous shopping spaces, have been particularly hard hit by changing consumer preferences and growing online competition.

“Because of the environment we’re in, the company should be open to dramatic change,” said Joshua Varghese, a fund manager at CI Investments with a 4.6 per cent stake according to Thomson Reuters data. HBC should reinvest any real estate proceeds into flagship stores and pay down debt, not open more locations, he said.

Jonathan Norwood, a fund manager at Mackenzie Investments, a top 10 shareholder with 2.5 per cent ownership, would prefer HBC focus on its property assets over its retail operations. “If they can right the retail business, that’s just icing on the cake for us,” said Norwood.

Litt and some shareholders say HBC should lease its marquee real estate to other retailers or companies seeking prime office space, or add a hospitality or residential component.

HBC has said it is reviewing Litt’s letter and would respond in due course, and declined to comment further.

But some say the board is already 100 per cent focused on creating shareholder value and does not need activist pressure.