The Wall Street Journal reported that HBC had made an “overture” to acquire Macy’s. And even though HBC’s market cap is around $2 billion, a bit small to digest Macy’s roughly $10 billion cap, HBC could leverage its considerably high-valued real estate, Saks Fifth Avenue in New York and Hudson’s Bay flagship in Toronto, as well as other assets, as collateral. We do know that Governor and Executive Chairman of HBC, Richard Baker, seems to be running around looking for anything retail, anywhere, that he can scoop up on the cheap. He recently had an interest in a potential Neiman Marcus acquisition, and he has sure been on a buying spree in Europe, gobbling up Galeria Kaufhof, the largest department store group in Germany, and Belgium’s only department store group, Galeria INNO, as well as Sportarena. And if you follow the jargon, HBC has “significant investments in real estate joint ventures.”

So it didn’t surprise me when I heard about the overture. And we do know that Macy’s has been struggling of late with sales declining for the last couple years and, as recently announced, they will be closing 63+ stores and laying off 10,000 people.

Whether or not anything comes of the HBC move, I, once again, have to inform my readers that Mr. Baker is not in the retail business. He’s quite brilliantly in the real estate business. So Mr. Merchant Prince he is not (which he would freely admit to). Furthermore, I’m not so sure he even cares about the retail businesses he owns. I do not say this with any malice: Real estate is what he excels in and, as we all learn in life, we should stick to what we do best.

So I am logically raising the question: Is this a real estate deal or a retail acquisition? One little hint was the HBC announcement on last year’s second quarter earnings loss that it was due to high real estate leasing costs. In essence, this is a “borrowing from Peter to pay Paul” scenario, in which “Paul” is the real estate business. If HBC is in the real estate business, that’s a good thing. If it’s in the retail business, it’s a bad thing.

However, Baker and CEO Jerry Storch say they are in both the real estate and the retail business. In fact, they have told me that they take the winnings from the real estate business and invest them back into the retail businesses. We do know they are doing this by spiffing up their flagships and expanding the Saks business in Canada along with other such initiatives. But I’m not sure which financial bucket is funding these investments.

Taking Baker and Storch at their word, that the real estate and retail businesses can create a great synergy leveraging the combination for higher growth for each (which we haven’t really seen happen yet in the retail business), the persistent question — and the elephant in the room, which would be an uber elephant if they were to acquire Macy’s — is what happens if all of the investment in the retail businesses don’t move the very sluggish needle?

So the gargantuan elephant in the room is, all of a sudden, so big it’s immovable. On top of that, with all the retail businesses Baker currently has throughout Europe and the U.S., with the complexity of their different market positions, each fighting to evolve technologically and perfecting all-channel distribution in an over-stored world, what does he do if all of these pieces hit the wall?

Will Baker give up on the retail businesses and revert to a total real estate play, managing the retail business down while increasing the real estate profits up? This would be similar to what Eddie “fast buck” Lampert has been doing with Sears/Kmart for the past decade, and which I predicted three years ago that this was the model Richard Baker could logically follow. (See my article Hudson Bay-SAKS-L&T: Real Estate or Retail?).

My own personal $64,000 question is: Did Richard Baker proactively plan the real estate strategy from the beginning, simply paying lip service to his retail/real estate synergy plan just to keep Wall Street, shareholders and employees happy?

In my opinion, Mr. Baker is very smart and I believe he totally gets how troubled the legacy retail industry is. I believe that deep down, he has real doubts about the odds for its return to robust growth. Hey folks! Look at the evidence. He’s gobbling up real estate, unlocking gazillions of square feet of higher valued real estate than the retail businesses operating on top of it.

Is this the ultimate future of legacy retail anchored by the sinking ship of an industry that has been asleep in the wheelhouse?