U.S. activist RAMPS UP HBC pressure

AGITATING FOR SALE OF REAL ESTATE TO OFFSET SHARE SLIDE

TORONTO • A U.S. activist investor has ramped up his calls for Hudson

Bay Co. to sell some real estate or explore other options to raise the value of its lagging shares.

Jonathan Litt, chief executive of Land and Buildings Investment Management, threatened to launch a proxy fight Monday if the company does not heed his public call in June for the company to monetize its real estate.

“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,” Litt wrote in an open letter to Hudson’s Bay’s board. Stamford, Conn.-based Land and Buildings owns close to five per cent of HBC’s shares.

“The company’s real estate is valued at $35 by third parties, more than three times the current share price, but is being valued in the public markets like other department store companies,” the letter says.

Litt said he met recently with Hudson’s Bay senior executives, including executive chairman Richard Baker and CEO Jerry Storch, and he believes the retailer “feels it has looked at all options to improve value. We completely disagree.”

He outlined a number of potential moves for HBC, such as selling off its luxury Saks Fifth Avenue chain and its European department store business, Galeria Kaufhof.

Other scenarios include a management-led buyout of the business.

The pressure comes amid fears HBC and other department store chains are becoming less relevant and losing ground to Amazon. Sears Canada has filed for bankruptcy protection and is closing 59 stores, while U.S. retailers including Macy’s, J.C. Penney and Kohl’s have closed hundreds of stores.

Hudson’s Bay’s shares traded up one per cent midday Monday, but had fallen 19.6 per cent this year as of last Friday’s close.

Litt has carved out a reputation as an aggressive investor and is known to challenge his targets by issuing public letters. In the last year alone, his Stamford, Ct. -based hedge fund has pushed for the sale of Brookdale Senior Living Inc., FelCor Lodging Trust Inc. and Forest City Realty Trust Inc.

In a statement, Hudson’s Bay said it looks forward to continued discussions with Land and Buildings.

“We are committed to our strategy of both operating leading retail banners and also creatively unlocking the value of our associated real estate holdings.”

The retailer cited its history of successfully surfacing the value of its real estate assets, generating more than $3 billion in cash proceeds. .

Litt also suggested in the letter that HBC needs to monetize its real estate joint ventures with Simon Property Group Inc. and RioCan Real Estate Investment Trust.

But his plea comes less than two weeks after RioCan founder and chief executive Edward Sonshine said now is not a good time for the partners to do a public share offer for the joint ventures, given the weak conditions of the market.