TORONTO - A group of prominent Canadian real estate firms is challenging an initiative by B.C. billionaire Ruby Liu to acquire 25 former Hudson's Bay leases. The landlords assert that Liu’s vision for these retail spaces is “entirely unrealistic” and contradicts basic commercial principles. The landlords, which include notable companies such as Cadillac Fairview, Oxford Properties, Ivanhoe Cambridge, KingSett Capital Inc., Morguard Investments Ltd., and Primaris Real Estate Investment Trust, have filed legal documents in the Ontario Superior Court to prevent Liu from taking over these leases.
The landlords argue that Liu lacks a detailed and credible business plan and, despite owning three shopping centers in B.C., does not possess the necessary experience or personnel to operate successfully from the former Hudson's Bay locations. Rory MacLeod, Cadillac Fairview's executive vice-president of operations, described her business as “an empty shell” and expressed skepticism regarding Liu’s capability to fund her operations, suggesting that she could run out of money before opening a single store.
This legal conflict emerged after Hudson's Bay announced Liu as the prospective buyer for 28 of its leases in May. While the court approved the transfer of the first three leases, which were associated with Liu's owned malls, the other 25 leases remain contentious due to their prime retail locations and favorable terms that were previously enjoyed by Hudson's Bay, which filed for creditor protection in March amidst significant debt obligations.
For instance, Hudson's Bay was paying only $1.3 million in annual rent for a 152,420 square-foot space at Fairview Mall in Toronto, which is considerably lower than what other tenants would typically pay for such prime space. As most landlords refused to agree to the lease transfer, Hudson's Bay sought a court ruling at the end of July to compel property owners to accept Liu as a tenant.
Liu envisions transforming the former Bay stores into a department store bearing her name, incorporating diverse offerings such as dining, entertainment, and recreational areas. However, according to MacLeod, Liu's proposals include transforming former Hudson's Bay spaces into multi-functional venues, which could breach existing lease agreements that permit only department store operations.
The landlords argue that Liu's grand plans exceed what the leases allow, with MacLeod citing her intentions to introduce additional concepts such as grocery stores and educational centers, which are incompatible with the leasing terms. Oxford Properties’ Nadia Corrado echoed these concerns, noting that during discussions, Liu expressed dissatisfaction with existing food court offerings at a different mall and suggested introducing an upscale dining experience that would not comply with lease restrictions.
In her affidavits, Liu claims she can launch at least 20 stores within 180 days, intending to invest $120 million in urgent repairs and $135 million for initial inventory. However, Cadillac Fairview has labeled her timeline as “entirely unrealistic.” They estimate a minimum of $43.1 million in repairs over the next decade to maintain the leases and ensure they meet legal requirements.
Corrado also criticized Liu’s renovation budget, suggesting that her allocation of $8 million for Southcentre Mall in Calgary is grossly inadequate. There are also concerns regarding Liu's ability to secure inventory, as evidence provided to the court consists mainly of letters indicating potential support rather than firm commitments from suppliers. Additionally, the staffing plan Liu put forth hinges on hiring 1,800 employees, which the landlords argue is impractical and insufficient for a retail chain of such scale.
The landlords concluded that if Liu's enterprise falters, it would detrimentally impact the mall environments for years to come, exceeding any redevelopment costs incurred. Executives from Ivanhoe Cambridge have expressed shared skepticism regarding Liu's chances of success, labeling her retail concept as "uncertain, untested, and unknown."
