Past the monetization of its flagship store, Litt wrote that Toronto-based HBC “should migrate back to its roots as a Canadian retailer.” He wrote that the Saks Fifth Avenue brand would likely be in high demand from potential buyers, thereby allowing the company to “focus on the Canadian market it has long dominated.”

By shrinking the store base across the company's US banners, which also include Lord & Taylor, HBC could create “a leaner organization with proceeds from monetizing the real estate distributed to shareholders,” Litt wrote. He also wants to see the company exit the European market, selling its Galeria Kaufhof real estate, operations, or both, with proceeds distributed to shareholders.

In his letter, Litt asserted that meetings with HBC management demonstrated that “the company feels it has looked at all options to improve value.” However, a spokeswoman for HBC tells GlobeSt.com that the company welcomes feedback from all of its shareholders, and looks forward to continued dialogue 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 spokeswoman says. We continue to transform our business to optimize performance and pursue growth in North America and Europe. Meanwhile, HBC has a strong history of successfully realizing underlying value of the company's real estate assets, and has generated more than $3 billion in cash proceeds through these efforts. We are constantly evaluating additional opportunities to continue this track record of significant value creation.”

STAMFORD, CT—Hudson's Bay Co., owner of the Saks Fifth Avenue brand, should consider monetizing that brand as well as its other real estate, Land and Buildings Investment Management said Monday in a letter to HBC shareholders. The investment management firm, which owns nearly 5% of HBC's stock and which is also seeking change at shopping center REIT Taubman Centers, threatened to launch a proxy battle if its strategic plan for the retailer's future isn't implemented.

“The department store landscape is rapidly evolving, as evidenced by management having to reduce its EBITDA guidance on multiple occasions with 2016 actual adjusted EBITDA 27% below its initial guidance and by the company announcing a restructuring plan earlier this year that is seeking to save C$350 million annually,” wrote Jonathan Litt, Land and Buildings' founder and CIO .”The company must act expeditiously before value continues to deteriorate by consolidating its operations and monetizing its real estate to capitalize on the disconnect between the company's current share price and underlying real estate value.”

Litt's letter, the second to HBC shareholders in as many months, asserted that HBC has more than $10 billion of potential monetization tied up in its real estate. The flagship Saks Fifth Avenue store in Manhattan alone has been valued at US$3.7 billion.

“A 650,00-square-foot department store is likely not the highest and best use of the real estate at one of the best locations in the United States,” Litt wrote. “Adding boutique retailers on the first three floors, redeveloping the upper floors to high-end residential condos with terraces and extraordinary views of Rockefeller Center, St. Patrick's Cathedral and Central Park, and shrinking the department store footprint would likely help maximize the value.”

Past the monetization of its flagship store, Litt wrote that Toronto-based HBC “should migrate back to its roots as a Canadian retailer.” He wrote that the Saks Fifth Avenue brand would likely be in high demand from potential buyers, thereby allowing the company to “focus on the Canadian market it has long dominated.”

By shrinking the store base across the company's US banners, which also include Lord & Taylor, HBC could create “a leaner organization with proceeds from monetizing the real estate distributed to shareholders,” Litt wrote. He also wants to see the company exit the European market, selling its Galeria Kaufhof real estate, operations, or both, with proceeds distributed to shareholders.

In his letter, Litt asserted that meetings with HBC management demonstrated that “the company feels it has looked at all options to improve value.” However, a spokeswoman for HBC tells GlobeSt.com that the company welcomes feedback from all of its shareholders, and looks forward to continued dialogue 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 spokeswoman says. We continue to transform our business to optimize performance and pursue growth in North America and Europe. Meanwhile, HBC has a strong history of successfully realizing underlying value of the company's real estate assets, and has generated more than $3 billion in cash proceeds through these efforts. We are constantly evaluating additional opportunities to continue this track record of significant value creation.”