RE:HBC leases
Farmer12 wrote: A retailer with malls in B.C. has, I believe, successfully bought up 26 of the Hudson's Bay leases. The price has not been published, as far as I know. Canadian Tire bought the logo, name and other assets for $30 million a few days ago. The sale of inventory from the stores has been going better than expected from what I read somewhere. Riocan was taking a 30% haircut on rents to the JV, with the difference being accrued and placed 5th in line when all the proceeds have been accumulated by the bean counters and lawyers. I don't know how all of this shakes out for Riocan. Apparently there are 60 leases or so with no expressed interest from buyers. One by one all of the leases will be dealt with and there should be more clarity in Q3 which is only a month or so away. In the meantime the dividend is nice and very well covered. The mystery remains how smart people at Riocan could tie themselves to a rotting corpse like this. Maybe in their wisdom they see things beyond my limited wattage.
I’ve wondered the same thing myself. What was the long-term strategic upside for RioCan when they entered into the JV? That said, the context back in 2015 was quite different. Ed Sonshine and the team may have seen a path to value creation that made more sense at the time.
On a few of the points you raised, I wanted to offer a bit of clarification that might help round out the picture:
1. Number of Leases: While HBC holds around 60 leases overall, only 10 of those are part of the Joint Venture with RioCan. We don’t yet know how many of those 10 have been acquired, but given their locations in high-traffic malls like Yorkdale, Scarborough Town Centre, and Square One, it seems likely that most of them have attracted interest.
2. The 30 Percent Rent Reduction: The rent reduction you mentioned applies only to two properties, Oakville Place and Georgian Mall. It’s not a haircut across the entire portfolio, though it is still an important consideration.
3. RioCan’s Exposure: RioCan owns just 22 percent of the JV, so its financial exposure is relatively limited, not 100% of the JV.
These details may not change the broader question you raised about the strategy behind the deal, but they might help clarify the structure and scale of RioCan’s involvement. In short, it's not as bad as people seem to think. This will unfold in the fullness of time.