Hey there, time traveller!
This article was published 17/1/2016 (525 days ago), so information in it may no longer be current.
How much is the downtown Hudson’s Bay store downtown really worth?
Of all the questions surrounding the future of the historic building, this is probably the only one that really matters. For it is the issue of value — and the ability of all interested parties to come to a fair assessment of value — that will ultimately determine its fate.
In case you had not heard, the Bay building downtown is fast approaching empty. Earlier this month, the Hudson Bay Company announced it was reducing its retail operation to just two floors. The company has been tight-lipped about the future of its flagship downtown store, portraying the downsizing as a strategic move to "improve navigation and enhance the overall shopping experience."
Notwithstanding this bit of public relations hyperbole, it has been quite obvious for quite a long time that the HBC’s flagship store has become a millstone around the company’s neck. At 600,000 square feet, it is among the largest buildings in the city, equal in square footage to the tallest office towers at Portage and Main. When its owners are using less than half of that space for their own purposes, you can be sure there is trouble brewing.
But what to do with a unique and historic property like this?
There has been talk of redevelopment for some time, but no firm plans have emerged. Several years ago, the University of Winnipeg revealed that HBC had raised the prospect of donating the store to be used as part of the school’s expanding downtown footprint. Ultimately, the university had to decline the opportunity because the costs of redeveloping the building were too great.
That has left the private sector and government somewhat flummoxed about what to do next. Ideally, a private developer backed with pledges of tenancy by one or more government departments would make a bid for the property. But this is where the issue of value comes in.
In its current configuration and size, the building would require substantial retrofitting. It does not have any of the features of a modern commercial property, and would need upgrades to mechanical and structural features. Those costs would be inflated by the fact there will be a need to preserve much of the original historic façade and some of the interior.
Although no firm cost estimates have been revealed, there are a number of government and private sector parties that have studied redevelopment of the property. Sources in government and the real estate and construction industries estimate it would cost well over $100 million to convert it into some other commercial use.
At that cost, it is quite possible the Bay building has what real estate professionals would call a "negative valuation." In other words, the cost of converting the building into another use is far greater than the fair market value of the property.
If that is the case — and there are an increasing number of knowledgeable people in this city who believe it to be so — it leaves HBC in a difficult position.
Will the company hold firm and demand to be paid, perhaps handsomely, for its building knowing the city, province and many in the community desperately want to see it saved? Or will the company essentially sell the building for a nominal amount to make redevelopment a viable option?
The HBC has not been forthcoming about its plans for the downtown flagship store. A company spokeswoman, contacted last week, declined to say whether the company is planning its own redevelopment, whether the building is formally up for sale and if so, whether an asking price has been established.
What we are left with is a classic standoff, with the company that owns the building making no real effort to redevelop it, and no government or private sector party willing to take it off their hands.
What does the future hold for this seminal piece of Winnipeg’s commercial and architectural history?
It is true that abandonment and demolition of the building seems out of the question. Even without a formal historic designation, the store is too important to the history and fabric of Winnipeg to be torn down.
However, to move things forward, someone or something is going to have to step forward and take charge of a plan to relieve HBC of the building and move forward on a practical redevelopment plan. The company may be able to continue as a tenant, but it seems clear HBC no longer wants to be the landlord.
Government will play a role in a solution, although not likely as the chief developer. The province has a longstanding pledge to occupy one floor of a retrofitted building, something that no doubt will contribute to a redevelopment plan. Government can also offer tax-increment financing support, or possibly deferred property taxes, to incent a private developer into taking on the project.
Government could, however, be a catalyst. There are a range of incentives that could be offered to the Hudson’s Bay to make the building available at a reasonable cost. All it takes is someone from the city, perhaps through CentreVenture, and the province, to make the right offer.
The federal and provincial governments could, in the right scenario, also offer HBC a substantial tax credit if the building were to be donated. That might not meet the company’s expectations on the value of the property, but it’s a start.
For now, it appears to be a standoff. The building’s current owners are making less and less use of the downtown store, making it less and less viable as a commercial undertaking. At some point in the future, someone is going to go to the company with a proposal for acquiring the building and converting it into something else.
And then all the interested parties will be given a chance to demonstrate how committed they are to saving this historic building.