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HBC's real estate, both owned and leased stores, is worth $5-billion.Jim Ross/The Globe and Mail

As a born-again public company, Hudson's Bay Co. will consider spinning off its valuable properties into a real estate investment trust, borrowing a page from the playbook of grocery giant Loblaw Cos. Ltd.

Richard Baker, the U.S. real estate magnate who controls HBC, is following the road map he set out when he acquired the retailer in 2008 and, two years earlier, the Lord & Taylor stores in the United States.

He said Tuesday he is weighing how he might unlock billions of dollars of real estate value in HBC, which includes the Bay (renamed Hudson's Bay), Lord & Taylor and Home Outfitters, by creating a REIT.

Last week, Loblaw enjoyed its highest surge in in its share price in nearly a year when it unveiled its plan to spin off most of its real estate assets into a REIT. The initiative surfaced at a time of heavy deal-making in the real estate sector and strong returns among REITs. Last week, a group led by KingSett Capital launched an unfriendly $4.4-billion bid for shopping mall owner Primaris Retail REIT. RioCan REIT is part of that deal, while also participating in the proposed purchase of a tract of land in downtown Toronto from the Thomson family.

But companies such as Loblaw and HBC may need to move quickly to cash in on the segment's robust performance in the event it starts to soften, industry observers have warned.

Shares of HBC have traded just below the $17 asking price of its initial public offering last month. On Tuesday, when HBC reported a widening of its third-quarter loss from a year earlier, the stock slipped 0.2 per cent to $16.77.

"It's better to own operating companies that own their own real estate," Mr. Baker, governor (chairman) and chief executive officer of HBC, said in an interview. "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."

He estimated that HBC's real estate – mostly owned and leased stores – is worth $5-billion, of which $4-billion could be part of a REIT, which he would pattern after Loblaw's proposal. His calculations are based on Loblaw's would-be model, under which the grocer would own more than 80 per cent of its real estate company.

"Maybe this was our plan from Day 1," he said, suggesting its shares wouldn't have responded to his musings on spinning off a REIT because they're still just hypothetical.

For now, Mr. Baker said he is focused on shoring up the retailer's performance. The company warned that its current quarter, which includes the crucial holiday period, could be pinched by disruptions from October's Hurricane Sandy. HBC's November same-store sales at outlets open a year or more – an important retail measure – were flat, with those sales dropping 12.4 per cent at Lord & Taylor (in U.S. dollars) and rising 9 per cent (in Canadian currency) at Hudson's Bay.

Adjusting for the roughly $20-million (U.S.) impact of the hurricane, same-stores sales at Lord & Taylor would have increased 3.7 per cent and consolidated same-store sales would have risen 5.7 per cent, it said.

In its third quarter, HBC's loss from continuing operations – excluding its discounter Zellers which it will close by next year – grew to $8.5-million or 8 cents a share compared with a loss of $7.5-million or 7 cents a share a year earlier.

Those department-store operations were squeezed by inventory shortage issues and price markdowns. Overall sales grew 3.8 per cent to $930.4-million from $896.7-million, helped by promotional events.

The retailer's overall third-quarter loss , including its "discontinued" operations which is principally its Zellers chain, stood at $2-million, or 2 cents a share, compared with a profit of $1.2-million or $11.83 a share a year earlier. HBC sold most of its Zellers leases to Target Corp. for $1.8-billion.

The company also unveiled a quarterly dividend of just over 9 cents a share, to be paid on Dec. 27 to shareholders of record at the close of business on Dec. 19.

Its third quarter same-store sales picked up by 3.5 per cent, driven mainly by promotions such as Bay Days. Those sales rose 4.5 per cent at the Bay and 5.2 per cent (in U.S. dollar) at Lord & Taylor but fell an undisclosed amount at Home Outfitters, which is HBC's smaller specialty superstore chain.

HBC is targeting same-store sales gains in the "mid-single digits" over each of the next several years.

Both chains enjoyed an uptick in sales as a result of promotions and discounts during Black Friday, the day after the U.S. Thanksgiving when retailers kick off the holiday season with major sales. The promotional event has become more common in Canada.