According to real estate mogul Richard Baker, governor and chief executive officer of HBC, the possibility is both beneficial to investors and the company alike. “It’s better to own operating companies that own their own real estate,” says Baker. “The market has never, in my opinion, properly appreciated public operating companies that own real estate. They never really appreciate the proper value of the real estate.”
Many observers are crying copycat, as the announcement comes hot on the heels that Loblaw will combine its properties into an investment fund – an announcement which helped the company enjoy it’s highest share prices in almost a year. But Baker mused, “Maybe this was our plan from Day 1,” adding that the plans are not concrete at this time. A boost in trading price would no doubt help HBC, as shares traded below the asking price of $17 last month.
That said, there are similarities between the two proposals. Baker estimated that the value of HBC’s combined real estate is worth a cool $5 billion, of which $4 billion could potentially be part of a REIT. The 80/20 ownership split is similar to Loblaw’s proposed model.
Investors have been weighing their options since the grocery giant announced its plans two weeks ago for a REIT due to launch in the middle of next year.
But will they bite?
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