Management and insiders would need less than C$400 million ($326.10 million) in additional capital to buy the 92 million shares they don't already own at C$18 per share to take it private, Litt said in the letter.

The Canadian department store operator, which has been battling seven quarters of losses, agreed in October to sell the Lord & Taylor building to WeWork for C$850 million, with Rhone investing an additional $500 million as part of the deal.

Litt's Land and Buildings hedge fund, which held a near 5 percent stake in Hudson's Bay as of July, has been pressing the company to boost its sliding share price by extracting value from its sizeable real estate holdings.

While Hudson's Bay has taken steps to get more value out of its real estate, Litt wants it to go further.

The Canadian department store operator values its real estate at C$30 per share, Litt said. Hudson's Bay shares were trading at C$10.50 on Wednesday, down 22 percent from a September peak, compared with the S&P 500 retailing index's 34 percent gain.

"The fourth quarter financing the Company announced leaves HBC flush with cash" (to go private), Litt said in the letter.

A Hudson's Bay spokesperson didn't immediately respond to an emailed request for comment.

Hudson's Bay is also seeking buyers for its namesake flagship store in Vancouver and Litt said the sale is expected to bring in C$2.50 per share. A disposal of the company's European real estate would fetch another C$5.20, he said.

Reuters reported in November that Austrian property and retail group Signa Holding had made a 3-billion euro ($3.74 billion) bid for HBC's German department store operation Kaufhof. HBC acknowledged the approach and said it would review it.

($1 = 0.8027 euros)

($1 = 1.2266 Canadian dollars)

(Reporting By Nichola Saminather; Editing by Phil Berlowitz)

By Nichola Saminather