It won’t show up on a stock screener, but don’t let that fool you.
Hudson’s Bay Company (TSX:HBC) is an incredibly cheap company.
Chairman Richard Baker has been quietly buying up competitors for their undervalued real estate. It bought Saks Inc. in 2013 for $2.4 billion, a sale which included the iconic Saks Building on 5th Avenue in New York City.
Hudson’s Bay had the Saks building appraised a little over a year later. The building alone was worth $3.7 billion. Saks also came with prime real estate in Chicago and Beverly Hills, among other places.
Before that, the company unlocked real estate value by selling its Zellers leases for $1.8 billion to Target.
According to management’s estimates, the total value of its real estate is $36 per share, while the operating company is worth an additional $8 per share. That values shares at $44 each, much higher than their current $11.80 price.
The real estate isn’t worth much as is, but Hudson’s Bay is taking steps to change that. It recently announced joint ventures with two large real estate companies. RioCan will join it to convert its Canadian properties into a REIT, while it does something similar with Simon Property Group in the United States.
The current value of these two joint ventures alone are more than $3.1 billion.
It should be ready to spin out much of its real estate in 2018 or 2019, once both joint ventures diversify more away from Hudson’s Bay brands.
Even if the real estate is only valued at $20 per share, it still represents close to 80% upside.
