Activist investor pushing for hotel, office conversion of Saks Fifth Avenue flagship


The land holdings of Hudson's Bay - controlled by NY real estate mogul Richard Baker - include Saks Fifth Avenue's flagship on Fifth Avenue, which "is one of the most valuable locations not only in Manhattan, but in the United States", according to Jonathan Litt of Land & Buildings Investment Management, a hedge fund that has taken a 4.3-percent stake in Toronto-based Hudson's Bay.

Jonathan Litt, founder and chief investment officer of Land & Buildings, in his letter also bemoaned HBC's 25% stock share drop in recent months.

Hudson's Bay said it is reviewing the letter and will respond in due course. CIBC reduced their target price on shares of Hudson's Bay Co from C$13.00 to C$10.50 in a report on Monday, June 12th. The letter pegs the real estate value of HBC at $35 per share, or four times the $8.88 a share the stock was trading at when the letter was drafted.

The activist investor says Hudson's needs to look at monetization options with its real estate and should consider insider go-private offers. Further, RioCan Real Estate Investment Trust, a leading Canadian shopping center REIT, marked the Company's Canadian real estate portfolio recently when it invested in Hudson's Bay Canadian real estate, implying a valuation of C$7 per share.

It says real estate executives speak highly of Richard Baker, a real estate mogul who is HBC's chairman and one of its main investors.

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Litt is a former managing director and senior property analyst at Citigroup, where he was responsible for global property investment strategy.

"To continue to highlight the value of its real estate assets, the Company may take additional actions which could include the sale of additional equity in its joint ventures or real estate assets, and/or a potential public listing of either or both of the joint ventures, in all cases subject to prevailing market conditions", it said on June 8.

Founded in 1670, HBC began as a fur trader and once owned more than 40 percent of what is now Canada and much of what became North Dakota and Minnesota.

Update: Stamford, Connecticut-based Land & Buildings is a real estate-focused hedge fund manager. "The path to maximizing the value of Hudson's Bay lies in its real estate, not its retail brands". If you're a betting person, the smart money is probably on 'No, ' " said Powers. The stock's market cap is $1.62 billion.

"I hope it will force the management team to address these issues in more detail with its shareholders", Varghese said. "When activists push a company to sell itself, the ultimate outcome for shareholders depends on whether an auction to the highest bidder will produce more value than sound, long-term management".