US mall developer Simon Property Group has teamed with Canada’s oldest retailer, Hudson’s Bay, to create a US$1.8 billion property joint venture.
Hudson’s Bay will contribute 42 properties to the partnership, which it will lease back. Simon, North America’s largest mall operator, will invest $278.5 million and eventually hold a 20 per cent cornerstone stake. A further $600 million will be borrowed against the assets and used to reduce Hudson’s Bay’s debt.
Among the properties Hudson’s Bay will contribute to the partnership are stores housing its subsidiary retail brands Lord & Taylor and Saks Fifth Avenue, including the latter’s high profile Beverly Hills, California, department store.
The new body will look for property acquisitions – centres and buildings with one or more retail tenants in the US and abroad.
In a separate deal, Hudson’s Bay will form another joint venture with Toronto-headquartered RioCan Real Estate Investment Trust to look for opportunities within Canada. That JV is estimated to be worth $1.6 billion.
Hudson’s Bay chairman Richard Baker said the company created the partnerships as a tool to eventually divest the assets via an IPO after aggregating substantial real estate holdings through the purchase of Saks and Lord & Taylor.
“As we go forward, our plans are to acquire core, cash- flowing, tenanted properties that will diversify our real estate portfolio,” Baker said. “This is a very different type of situation than years ago when retailers created real estate ventures in order to develop new projects.”