Hudson's Bay takes out mortgage on Saks Fifth Avenue

Canadian department store operator Hudson's Bay Co. (NYSE:HBC) announced a $1.25 billion refinancing plan in a move to reduce its debt acquired with the purchase of Saks.

The company is taking out a 20-year mortgage on the ground portion of its Saks Fifth Avenue flagship store in Manhattan, reported Reuters. The property is valued at $4.1 billion.

Hudson's Bay bought Saks last year for $2.4 billion in cash and assumed about $500 million in debt through the deal. Hudson's Bay had been debating a real estate investment trust to monetize the holidays and help pay down the debt.

Next year, Hudson's Bay plans to renovate the flagship store. Therefore, refinancing will help pay off loans and the company can begin on a $250 million renovation.

"Critically, the transaction allows us to retain tremendous flexibility and control over our most important flagship property," said HBC CEO Richard Baker in a statement to Reuters.

The company is looking to extract real estate value from its other portfolio of stores: 19 locations in Canada and 61 others in the United States. Last summer, Saks announced it would add seven new stores in Canada in response to changing Canadian shopping habits and the availability of foreign prime real estate.

Sears (NYSE:SHLD) announced last week that it was considering monetizing some of its real estate through the creation of a real estate investment trust, in order to raise more cash.

For more:
-See this Reuters article

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