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Hudson's Bay secures $1.25bn mortgage for New York Saks Fifth Avenue

RBR Staff Writer Published 25 November 2014

Canadian department store operator Hudson's Bay Co. has secured a 20-year mortgage of $1.25bn for the ground portion of its flagship Saks Fifth Avenue store in New York City.


The entire property has been valued at $3.644bn by an independent appraiser, which Hudson's Bay says, represents half of the estimated value of its entire real estate portfolio.

Commenting on the deal, Hudson's Bay's governor and CEO Richard Baker said:"Critically, the transaction allows us to retain tremendous flexibility and control over our most important flagship property including, for example, the ability to vend the property into a REIT or secure additional leverage on the leasehold interest.

"As we advance our efforts to create and realize value from our substantial real estate portfolio, it became obvious to us that our Saks Fifth Avenue New York flagship was unique and we should treat this very special asset differently than our other properties."

All proceeds from the financing will be used to pay down debt which got accumulated as Hudson's acquired its American rival Saks last year.

Emphasising on the importance of Saks Fifth Avenue New York flagship, Hudson's Bay will also start a significant $250m renovation and upgrade in the first half of 2015.

Hudson's Bay is contemplating more such deals from its real estate portfolio, which includes the Lord & Taylor Fifth Avenue flagship, the Saks Beverly Hills flagship and 59 other owned and ground leased locations in the US, along with 19 locations in Canada.

Richard Baker earlier sold the Zellers leases to Target for $1.8bn in 2011, which was far more than the purchase price of $1.1bn for the entire HBC department store group three years earlier that included the Bay, Home Outfitters, and Zellers, reports Financial Post.

The transaction is expected to close early next month.

Image: Sak's Fifth Avenue's flagship store on 5th Avenue and 49th Street. Photo courtsey of David Shankbone, originally uploaded at Wikipedia.