Land & Buildings Issues Letter to Hudson’s Bay Special Committee

Land & Buildings Investment Management, LLC (together with its
affiliates, "Land & Buildings") today issued the following letter to the
Special Committee of independent directors of Hudson’s Bay Company (TSX:
HBC) (“Hudson’s Bay”, “HBC” or the "Company”), which has been tasked
with evaluating a woefully inadequate offer led by management (the
“Management Buyout Group”)¹ to acquire the Company.

The full text of the letter follows:

Dear David Leith, Stephanie Coyles, Wayne Pommen, Earl Rotman and
Matthew Rubel,

In writing to you, the independent members of the Board assigned to the
Special Committee to evaluate the Management Buyout Group’s proposal to
purchase Hudson’s Bay at C$9.45 per share, we want to be clear: this
offer materially undervalues the exceptional assets the Company owns.
Hudson’s Bay CEO Helena Foulkes stated on September 18, 2018 that the
real estate owned by the Company was worth C$28 per share,²
and subsequently stated in the June 13, 2019 first quarter earnings
release that the Company will have completed, “real estate transactions
at near or better than our estimated equity values.”³

We trust that you, the Special Committee, will fully and fairly evaluate
the proposal, and thus will ultimately agree that it is woefully
inadequate. As a result, we hope you will explore other potential
transactions to maximize value for all shareholders by:

1. Undertaking a robust strategic alternatives process, given the iconic
   nature of HBC’s real estate that would attract a deep potential buyer
   pool; and
2. Hiring a truly independent investment bank, without former business or
   personal relationships with any members of the Management Buyout Group
   or HBC’s non-independent Board members, to evaluate the value of the
   Company’s real estate and retail banners.

Furthermore, the Management Buyout Group’s offer to buy the minority
shareholders’ interest in Hudson’s Bay is being 100% paid for with
proceeds from the sale of Company assets, notably the 50% stake in the
Company’s European real estate joint venture for C$1.5 billion, which is
expected to close later this year. The Management Buyout Group is not
investing any capital to fund the purchase of HBC. In fact, the
Management Buyout Group will have excess proceeds from the sale of the
European joint venture stake of C$773 million, which they could
immediately distribute to themselves. Based on our calculations, the
Management Buyout Group could apply the entire C$1.5 billion to buy out
the minority shareholders at C$18 per share, nearly twice the amount of
the current offer, and retain ownership of all the remaining assets of
the Company.⁴

Minority shareholders represent 35% of the Company’s outstanding shares.
We believe it is highly unlikely that a majority of the minority
shareholders will approve the transaction, given the substantial
undervaluation the offer represents, which approval the Management
Buyout Group stated would be required as a closing condition.
Management’s attempt to understate the Management Buyout Group’s stake
in Hudson’s Bay by excluding management’s pending purchase later this
month of 10% of the HBC common shares from Ontario Teachers' Pension
Plan Board (“OTPP”) for C$9.45 will likely be highly scrutinized by the
Ontario Securities Commission – given the related party transaction
management is proposing.

Notably, the Management Buyout Group’s total ownership of the Company,
assuming the full conversion of preferred shares, is 65%, not the 58%
disclosed in the Management Buyout Group’s and the Company’s filings.
The shares that entities controlled by Richard Baker, Governor and
Executive Chairman of HBC, are contractually obligated to purchase from
an affiliate of Ontario Teachers' Pension Plan Board will of course need
to be included in the Management Buyout Group’s ownership. The key terms
of the Purchase Agreement as disclosed in the Early Warning Report filed
January 7, 2019 noted that “Pursuant to the Purchase Agreement, the
closing of the transaction of the purchase and sale of the Purchased
Shares will occur on the first business day following the six (6) month
anniversary of the date of the Purchase Agreement or such earlier
business day as elected by the Purchaser and agreed to by the Vendor.”

Any attempt by the Management Buyout Group to artificially delay or
cancel the closing of the purchase of OTPP’s shares in an attempt to
facilitate the approval of the insider bid with OTPP voting to approve
the proposal as a “minority shareholder” would in our view be absurd. As
a result, the Management Buyout Group’s ownership is 65%, not the 58%
misrepresented in filings. Land & Buildings
intends to pursue every means necessary to ensure a fair shareholder
vote if the Special Committee deems OTPP to constitute a minority
shareholder for purposes of voting on the Management Buyout Group’s offer.

We look forward to working with the Special Committee to discuss the
best strategies to maximize value for all shareholders.

Sincerely,

Jonathan Litt

Founder & CIO

Land & Buildings Investment Management, LLC

¹ Includes individuals and entities related to, or affiliated
with, Richard A. Baker, Governor and Executive Chairman of HBC; Rhône
Capital L.L.C.; WeWork Property Advisors; Hanover Investments
(Luxembourg) S.A.; and Abrams Capital Management, L.P.
²
Scotiabank Back to School Conference Fireside chat with Helena Foulkes.
³
Hudson’s Bay earnings release issued June 13, 2019.
⁴
Represents 83 million shares of true minority shareholders (239 million
total shares outstanding on an as-converted basis less 138 million
shares on an as converted owned disclosed by the Management Buyout Group
less 18 million shares owned where Richard Baker is contractually
obligated to buy shares from Ontario Teachers’ Pension Plan Board).

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