HBC lease deal shakes up luxury market, reveals Saks debut

There is rarely a dull moment in the retail wars in Canada, a truth firmly underscored by today’s announcement by the Hudson’s Bay Company that it has sold off its flagship store at the corner of Queen and Yonge streets in downtown Toronto.

The deal with purchaser Cadillac Fairview Corporation Limited is worth an estimated $650 million and includes the Simpson’s Tower at 401 Bay Street. It’s set to close Feb. 25.
But don’t expect the iconic department store to follow in the footsteps of an ailing Sears Canada.

HBC has big plans for the prime retail complex, which it will lease for at least another 25 years (with renewal options for a term just under 50 years).

We’ve already been hearing much about HBC’s bid to bring Saks Fifth Avenue to Canada.

The company has now confirmed Canadians will get our first taste of the luxury American brand with a 150,000-square -foot, full-line store opening within the flagship space in the fall of 2015.

As part of the deal with Cadillac Fairview, HBC has also agreed to lease space in Toronto’s Sherway Gardens for a second full-line Saks store.

HBC acquired Saks late last year for US$2.9 billion. Until today, company executives have been cagey about its exact plans for the brand. Richard Baker, the company’s colourful CEO, had earlier stated he wanted to convert the old Bay at Bloor and Yonge into a full-line Saks in a bid to stake its claim in Canada’s luxury market in the face of formidable competition brewing at home and across the border.

This is the year Nordstrom begins its big push into Canada. The century-old American company will bring its near-mythic levels of customer service north this fall when it opens the first of as many as 10 full-line stores in Calgary.

Meanwhile, Canadian retail royalty, Holt Renfrew, has committed $300 million to an ambitious nation-wide expansion and renovation project that will double the size of Toronto’s Yorkdale store and make way for the construction of two new stores in Mississauga and Montreal.

On Monday, Baker said in a media release the sale-leaseback deal with Cadillac Fairview will give HBC the money it needs to reduce debt and invest in growth initiatives, and he suggested more big surprises may be in store at flagships across the country.

“We continue to explore other options to create additional value through the power and potential of our real-estate assets,” he said.

John Sullivan, president and CEO of Cadillac Fairview, said his company is excited to be the first to bring Saks into the country, noting “a significant and untapped opportunity” for the luxury retailer in Canada.