TORONTO and NEW YORK CITY—Hudson's Bay Co. has sold US$533 million of equity interests in HBS Global Properties, the joint venture it formed with Simon Property Group this past February that is now valued at US$4.5 billion. HBC plans to use proceeds from the equity sale, along with cash on hand, to reduce its outstanding term loan B borrowings from US$1.085 billion to US$500 million.

The JV's three new equity partners include Ivanhoé Cambridge, which has come in with US$250 million; Madison International Realty with US$150 million; and a large US pension fund with US$133 million. As part of the transactions, Ivanhoé Cambridge will be granted representation on the board of directors of HBS Global Properties, raising the total number of board seats from four to five.

What the three third-party investors have bought into is an 83-property retail portfolio totaling 17.8 million square feet across the US and Germany. It includes the Saks Fifth Avenue Beverly Hills flagship store and 41 of the 100-plus Galeria Kaufhof locations in major German markets that HBC acquired earlier this year for $3.2 billion. 

HBC will retain an ownership interest of approximately 63% in HBS Global Properties as a result of this transaction and following the contribution of Simon's $100-million commitment for tenant improvements. "These transactions further demonstrate the substantial value of our real estate portfolio, and our ability to unlock this value for our shareholders," says Richard A. Baker, governor and executive chairman the Toronto-based retailer.

RBC Capital Markets acted as exclusive financial advisor to HBC in connection with the equity sale, while Willkie Farr & Gallagher LLP provided legal counsel. The law firm also advised on HBC's forthcoming Saks OFF FIFTH opening in New York City. HBC announced this past September that it would sell equity interests worth between US$400 million and US$600 million in the JV.