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HBC REIT may jack up retail lease rates

The news sounds so sexy at first.

Following in the footsteps of Loblaw Companies Ltd., Hudson’s Bay Co. wants to spin its properties into a new real estate investment trust and raise money through an initial public offering, giving management some cash to do whatever it pleases.

But long-term, things may not be so rosy. REIT valuations are driven by market rents and the prospects of increasing lease payments, and a new REIT holding HBC properties will have to play by the same rules.