As Hudson’s Bay Co steps up the pace of extracting value from its $5 billion property portfolio, the department store chain’s shareholders want it to reduce debt, return cash to them and not invest the proceeds in traditional retail operations.

Hudson’s Bay is not new to selling real estate, but its actions are under greater scrutiny amid rising tensions between the company and activist hedge fund Land & Buildings, which says it holds about 5 percent of the company.

The fund wants the owner of Saks Fifth Avenue and Lord & Taylor to sell or convert stores to alternate uses and transform itself into a real estate play. It values HBC’s real estate at about C$35 a share, three times more than the company’s current level.

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“The perception, and in some cases, the reality, is that (Amazon.com Inc) is speeding bricks and mortar retailers into submission,” said Jonathan Norwood of Mackenzie Investments, HBC’s eighth-biggest shareholder.

“If they sell the real estate, we want to see the money used to reduce debt and returned to shareholders,” added Norwood, who co-leads Mackenzie’s value-focused Cundill team. “We don’t want it going to revitalize or grow the retail operations.”

HBC is exploring the sale of its Vancouver flagship store, estimated at about C$800 million ($628.4 million), after selling its Lord & Taylor property in Manhattan for $850 million last month..

Selling properties will further expose HBC to a brutal retail market but has not deterred the company from opening new stores in the Netherlands this year.

“It’s hard for an investor to get excited about new store openings when existing stores are on rocky ground,” said Joshua Varghese, portfolio manager at CI Investments, HBC’s sixth-largest shareholder.

The company should “seriously consider” a 3 billion euro offer from Signa Holdings for its German stores, Varghese said, noting HBC shares are unlikely to see significant gains without clarity on the company’s strategy.

An HBC spokeswoman declined to say whether the company has identified areas to deploy the proceeds from any future asset sales. It will use funds from the Lord & Taylor sale to pay down debt, which totaled C$3.4 billion as of July 29, excluding its two joint ventures.

HBC’s net debt was 4.7 times earnings before interest, taxes, depreciation and amortization after the Lord & Taylor sale, compared with an industry average of 2, according to Royal Bank of Canada.

“If Richard (Baker, HBC’s executive chairman) sells the Vancouver store, he’ll probably pay off debt on the operating company,” said an HBC shareholder who declined to be identified. “I don’t think they’ll sell all the stores; they’re monetizing individual stores where demand is good.”

($1 = 1.2717 Canadian dollars)