Bay a high-maintenance gift

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It's a tremendous opportunity but one that might prove difficult to accept.

Sources have confirmed the Hudson's Bay Co. has offered to give its downtown flagship store on Portage Avenue to the University of Winnipeg for what is believed to be a nominal cost, perhaps as low as $1. At first blush, it seems like a pretty cool deal.

The U of W has had, for some years now, an interest in the HBC property. It is an iconic structure, both in terms of its architecture and the relationship the company has with the history of Winnipeg and Manitoba. For the university, which has been aggressively expanding its footprint, the HBC property also represents an important building block in the establishment of a downtown campus proper.

Two years ago, the new U.S.-based owners of HBC offered the U of W 21/2 floors of the six-storey building rent-free. The plan was to use this new space to establish a national centre for aboriginal study, arts and culture, a dream that university president Lloyd Axworthy has enunciated publicly for some time. The new offer apparently sprang out of those negotiations.

HBC officials declined comment when contacted by the Free Press. However, U of W spokesman Jeremy Read, senior executive officer and adviser to Axworthy, confirmed the offer. Read said it is still early in the negotiations to determine whether the school can afford to take HBC up on its generous offer. "It is, in many ways, a very attractive opportunity," Read said. "Whether at the end of the day it would make sense, we're still exploring that."

The problem, of course, is the sheer size of the building. Each of the six storeys of the building represents approximately 90,000 square feet of space. To put that in perspective, the downtown Bay has as much space as 360 Main St., Winnipeg's largest office tower.

And it's not just the size, but the condition of the building. Just about anyone with any experience in retrofitting older buildings will tell you it is incredibly expensive, often more expensive than building from scratch. You need a compelling, non-business argument to justify the cost of saving and re-purposing a building of this size. You likely also need some substantial government funding.

Read said the school is looking for other partners interested in occupying some of the space. And it is believed there must be a ground-floor retailer operating out of the building to make the project financially viable, he added. Of course, there is a national retailer operating out of the main floor right now, but one can fairly deduce there is no guarantee HBC would continue in that role if the building were gifted to the U of W.

HBC has struggled for years to justify its presence in downtown Winnipeg. At present, the Bay is only operating on the first, second and fourth floors; a Zellers store, another of the HBC brands, operates out of the basement.

Various options have been examined to breathe new life into the building: the relocation of various government entities including, most notably, the Manitoba Lotteries Corporation; development of luxury condominiums; or home to a new, high-end U.S. retail chain. None of those options panned out, which seems to have prompted HBC to make its offer to the U of W. That suggests HBC is getting ready to leave the downtown for good. A building of that size, located in a downtown that is still struggling to find its critical mass, is undoubtedly an enormous, sucking liability. When you've got a building that is expensive to own and virtually impossible to sell, why not give it away? And get a substantial tax receipt for your donation in the process.

There are still scenarios that would see HBC remain as part of the solution for its flagship store. The U.S. parent company of HBC also owns and operates Lord and Taylor, the oldest upper-end department-store chain in the U.S. Would an L&T outlet on the main floor of the HBC building help make the deal more viable for the U of W? It's hard not to think that if that were a possibility, HBC would already be pursuing it and would not need to give the building away to someone else.

It is extremely unlikely the HBC building on Portage Avenue will be abandoned, as was the case with the former Eaton's building downtown. HBC is too important to the history of this place, and the building is too magnificent, to simply board it up. However, the city and province, both of which would be needed to help finance a re-purposing of this grand structure, may not step forward without some sort of dramatic announcement by HBC.

This could very well be a wonderful opportunity for the U of W and for downtown Winnipeg. However, it's best if the school takes the time to ensure it can afford HBC's generosity.

dan.lett@freepress.mb.ca

Republished from the Winnipeg Free Press print edition January 13, 2012 A4