TORONTO and NEW YORK CITY—Hudson's Bay Co. and Simon Property Group said Wednesday they had closed on their US$1.8-billion joint venture, first announced in February. The two companies said the JV would enable them to build on the strength of existing real estate assets, including 42 HBC-owned or ground-leased properties, and identify new real estate growth opportunities.

Those 42 HBC properties included the Saks Fifth Avenue flagship store in Beverly Hills, CA and Lord & Taylor stores in Scarsdale, NY and Manhasset, NY. In all, the JV portfolio totals 5.4 million square feet and is valued at $1.7 billion.

Third-party debt at the HBC-Simon JV totaling US$846 million was arranged in conjunction with the closing, with HBC receiving US$600 million in cash proceeds toward the properties it contributed. HBC intends to use these proceeds to repay the balance of its existing term loan B and reduce the borrowings on its US revolving credit facility.

For its part, Simon will contribute up to US$278 million to the JV, including US$100 million for improvements to properties that HBC contributed. The JV expects to use the remaining US$246 million of third-party debt, and the remaining US$178 million of Simon's contribution, to partially fund the acquisitions of at least 40 Kaufhof stores in Germany, part of HBC's previously announced US$3.2-billion acquisition of Metro Group's Galeria Kaufhof department store group.

The HBC-Simon JV is establishing a dedicated management team to oversee the contributed properties and grow the portfolio, with support from HBC and Simon. This team will be led by industry veteran Lee Neibart, a member of HBC's board.

In February, HBC executive chairman Richard Baker said, “By partnering with Simon, the leading REIT in the US market, we are taking an important step forward in HBC's next chapter of growth.” He added that the JV would benefit from “a strong foundation of HBC properties, whose tremendous value has been recognized by our best-in-class partner.”

BofA Merrill Lynch acted as financial advisor to HBC on the transaction with Simon. Willkie Farr & Gallagher LLP provided legal counsel to HBC.

Simultaneous with HBC's Feb. 25 announcement of its JV with a US retail REIT was its announcement of a separate venture with a Canada-based retail trust. The first tranche of that JV, with RioCan Investment Trust, closed two weeks ago.