Hudson's Bay, a historic Canadian retailer, has encountered significant challenges regarding its agreement to sell approximately two dozen leases to B.C. entrepreneur Weihong Liu. Recent court filings reveal that landlords of many of the properties are largely opposed to Liu's intended occupancy.
The filings, submitted by Alvarez & Marsal Canada Inc., the court-appointed monitor assisting Hudson's Bay through its creditor protection process, indicate that landlords representing 23 of the 25 leases Liu had agreed to acquire are unwilling to approve her plans. The landlords express that they would actively oppose any efforts to facilitate a forced assignment of the leases to Liu.
Media attention surrounding Liu peaked when Hudson's Bay announced her as the selected purchaser for up to 28 leases associated with both the Hudson’s Bay and Saks brands across Alberta, British Columbia, and Ontario. Notably, three of these leases are located at B.C. malls that Liu owns, namely Tsawwassen Mills, Mayfair Shopping Centre, and Woodgrove Centre. Court documents indicate that Liu is prepared to pay $2 million for each of these leases.
As Hudson's Bay seeks court approval for the agreement on Monday, it has yet to present the full plan regarding the broader 25-lease transaction to Judge Peter Osborne, as efforts continue to secure landlord acceptance. Earlier filed court documents suggested that landlords voiced "concerns" about the plan, although specifics of their objections were not disclosed.
Liu’s vision involves transforming the acquired properties into modernized department stores that will bear her name. In discussions with The Canadian Press, Liu elaborated that her stores are designed to offer not only merchandise like makeup, jewelry, and apparel, but also features such as children's play areas, dining options, and entertainment spaces. However, questions remain about whether the existing lease agreements allow for such amenities. Should the leases prohibit these activities, landlord approval would be needed for any necessary amendments to accommodate Liu's business concept.
Alvarez & Marsal reported that Liu and her legal team are currently working to provide landlords with more comprehensive information regarding her plans for the spaces. According to the provisions of the Companies’ Creditors Arrangement Act, Hudson's Bay possesses the ability to request the court to assign its leases to Liu despite landlord resistance. In making its determination, the court will evaluate the appointed monitor's perspective and Liu's ability to meet the lease obligations, along with her suitability for contract assignment.
In addition to Liu's prospective deals, Alvarez & Marsal highlighted the retailer's efforts in attempting to identify other potential lease buyers. The monitor disclosed interest from an unnamed party looking to acquire up to eight additional leases across Ontario, Alberta, Saskatchewan, and Manitoba. There is also progress toward a deal with another landlord interested in purchasing one of Hudson's Bay's leases for $250,000.
Previously, Hudson's Bay had been on track for another transaction; however, Alvarez & Marsal indicated that this agreement fell apart when the interested company refused to rectify discrepancies in the contract and subsequently withdrew from the purchase process.
This recent push to offload leases follows Hudson's Bay's filing for creditor protection in March stemming from escalating debt challenges. The company managed to sell its name and trademarks to Canadian Tire Corp. Ltd. for $30 million and proceeded to liquidate its physical stores, which ultimately closed in late May. Alvarez & Marsal revealed that the sale of Hudson's Bay's owned merchandise yielded a total of $349.3 million, boosted by $104 million from consignment goods, $43.9 million from additional products through a consultant agreement, and approximately $12.7 million from furniture, fixtures, and equipment sales. Although sales exceeded expectations, they were tempered by higher-than-anticipated gift card redemptions and diminished interest in furniture and fixtures.
