Eye-popping clearance sales are luring bargain hunters back — perhaps for one final visit — to once-revered, now ghostly Hudson’s Bay stores, but the centuries-old department store will never be what it once was.
Many believe the company’s vast real estate portfolio, valued at $6.4 billion in 2017, was the crown jewel that enticed American businessman Richard Baker to purchase the company 17 years ago. But today stakeholders and Canadians alike are confronted with the harsh reality: the massive real estate holdings were not enough to save Canada’s oldest company.
Hudson’s Bay filed for creditor protection on March 7 and received court approval to liquidate of most of its business, putting more than 9,000 jobs on the chopping block.
Baker “has used real estate holdings as the basis of his activities in acquisition and expansion,” said Mark Cohen, former CEO of Sears Canada. But Cohen and other experts the Star spoke to say that beyond a whirlwind of acquisitions and sell-offs of retail brands, Hudson’s Bay Company appears to have made little investment in its Canadian retail operations over the past few years.
The COVID-19 pandemic was the final blow, pushing the company further into debt — which totalled more than $1 billion by 2025 — with nearly all of its partially-owned properties ending up mortgaged.
Hudson’s Bay did not respond to the Star’s requests for comment.
From the outset, many in the retail world viewed Baker as a real estate tycoon in retailer’s clothing — a perception cemented when he sold more than 200 Zellers leases to Target for $1.8 billion, a staggering $700 million more than he paid for Hudson’s Bay three years earlier.
Since then, Baker has rapidly expanded his retail empire, acquiring more department stores along the way — including Saks in 2013, which he relaunched with a lavish $250-million renovation of its Manhattan flagship.
He also acquired Galeria Kaufhof, Germany’s largest department store chain, and took over 20 stores from Vroom & Dreesmann, a historic Dutch retailer, only to swiftly announce his full exit from the European foray in 2019.
In the same year, Hudson’s Bay sold Lord & Taylor to Le Tote for $100 million, while holding on to the real estate on which the stores are located. Just a few months later, Lord & Taylor, the oldest department store in the U.S., went bankrupt.
Bruce Winder, a retail analyst, said the decline of the brick-and-mortar side of the operations in the past few years shows a lack of investment — many of Hudson’s Bay buildings have fallen into disrepair, with escalators out of service, shelves left unstocked, and overdue payments to landlords and suppliers.
“At least from the outside, it looks like they harvested a lot … but chose not to reinvest that money into the store, into the brands,” Winder said. “They must have felt that the Bay wasn’t going to give them a good return on investment for the money.”
For Cohen, successful retail operations start with leadership, but he noted that many of those who stepped into the CEO role lasted less than two years.
Hudson’s Bay also mined millions of dollars in cash from its own real estate holdings in Canada, unlocking $650 million from selling the Toronto flagship on Queen Street to Cadillac Fairview and leasing it back in 2014. Soon after, the retailer created a joint venture with RioCan Real Estate Investment Trust, which contributed $325 million in exchange for a 20 per cent equity stake. The joint venture includes 10 properties the retailer owns.
While real estate transactions were taking place at a frantic pace across the border, the department store found itself bleeding money. After reporting a net loss in nine of its last 12 quarters, Hudson’s Bay was taken private in 2020 as the retail giant’s stock price plummeted in lockstep with sales.
Prior to the pandemic, Fred Waks, the former president of RioCan, said he saw Baker present “extensive plans” in New York which sought to repurpose the downtown real estate in Canada for other uses, such as residential buildings, hotels and offices.
“Richard is extremely compelling, and he’s a visionary,” Waks said.
“It was a very sound approach he had. And then COVID happened, and then COVID changed the whole paradigm in terms of people’s occupancy and working from home, and he can’t control that,” he continued.
The RioCan-Hudson’s Bay joint venture owns five downtown stores in Vancouver, Calgary, Windsor, Montreal and Ottawa, which Waks said are not worth what they were five years ago, due to these areas not recovering from the drop in foot traffic caused by the move to remote work.
In 2022, the retailer announced a mixed-use proposal to redevelop its downtown Vancouver flagship store to provide space for other retail, restaurant and public space uses. But a rezoning application was never submitted.
“If they could have successfully sold off substantial parts of the Hudson’s Bay portfolio, he would have done it. You would have kept the business propped up,” Cohen said, noting that none of the properties or head leases under the joint venture have been sold. “Apparently no one was interested, or no one was interested in an investment at a level Baker required to do a deal.”
The bottom line, he said, is that investors are interested in viable businesses, which was not the case with Hudson’s Bay Company.
Over the past four years, Hudson’s Bay has made Hail Mary attempts, assuming mortgages on two head leases and seven mortgages on five of the seven properties it owns under the joint venture — most of which were taken out in 2024 — for a total principal amount of $836 million.
The rapid pace of taking mortgages would have raised public concern if the retailer hadn’t recently been a private company, said Alex Arifuzzaman, founder of retail real estate adviser InterStratics Consultants.
Arifuzzaman speculated that the mortgages were used for operating expenses and to cover a shortfall in revenue, rather than for long-term investment. “That’s like using your credit card to buy groceries, your credit card to pay your mortgage,” he said.
Until recently, Hudson’s Bay still believed it had “a little bit more runway to support mortgages and more financing,” said Arifuzzaman, based on the court documents. But the trade war and ensuing uncertainty in financial markets made it difficult for the retailer to secure additional financing or monetize its real estate assets.
“(Baker) wanted to continue to hive off value, but he ran out of opportunity. Once you mortgage all your stores, yeah, you can remortgage your stores, but you can only do that if your business is successful,” said Cohen.
Last year, Saks bought American retailer Neiman Marcus for $2.65 billion (U.S.), created a new entity called Saks Global and separated the Canadian entity into a stand-alone.
While the company claimed at that time this would significantly reduce leverage and enhance liquidity, Cohen said he believes it was done to protect the American operations.
“The lenders who support the acquisition of Neiman Marcus would not have found the deal with him acceptable, with all of his liability hanging over his head in Canada,” he said.
