British Columbia-based Chinese billionaire Ruby Liu is facing an uphill battle in her quest to acquire 25 of Hudson's Bay's former leases and the quest is getting more challenging after Cadillac Fairview (CF) made a new filing in court this week voicing its opposition to the sale.
After the Hudson's Bay Company (HBC) filed for and was granted creditor protection under the Companies' Creditors Arrangement Act (CCAA) on March 7, all of the stores it was operating — under the Hudson's Bay, Saks Fifth Avenue, Saks OFF 5th brands — were liquidated and closed.
The main piece of outstanding business is now the fates of all of Hudson's Bay leases. The Ontario Superior Court approved the lease monetization process in March, which consisted of two phases. Following the first phase, 18 parties submitted bids pertaining to 65 individual leases (with overlapping interest in certain locations). That was then whittled down to 12 parties for 39 individual leases. At the end of the process, Hudson's Bay and the court-appointed Monitor entered into an agreement with Central Walk, the company chaired by Ruby Liu, for 28 of Hudson's Bay's leases.
Last month, Liu received approval to acquire three of the 28 leases through Ruby Liu Commercial Investment Corp. for $2 million each and a grand total of $6 million. Approval was secured in that case because Liu obtained consent from the landlords of those three leases — a foregone conclusion considering the leases were for spaces at the three malls owned by Central Walk.
That left 25 leases and Liu has had much more trouble securing consent from those landlords. Although court documents suggest that many landlords are opposed to the transaction to Central Walk, the only one who has spoken out publicly is Cadillac Fairview, which is a wholly-owned real estate subsidiary of the Ontario Teachers' Pension Plan (OTPP) and one of the largest owners and operators of large regional malls in Canada.
"CF remains resolutely opposed to the assignment of the former HBC leases to Central Walk/Ruby Liu Commercial Investment Corp.," the company said in its filing, which was responding to September 11 being proposed as the target hearing date for the sale approval. "The Central Walk Transaction will cause serious material prejudice to CF and other similarly situated Landlords. If approved, the Central Walk Transaction would potentially lock the Landlords into multi-decade tenancies with an untested anchor tenant and a deeply flawed retail concept at 25 locations across Canada."
CF-HBC Leases
To date, the list of 25 leases and the landlords have not been made public, but Cadillac Fairview's filing confirms at least some of the leases pertaining to its shopping centres are included in the proposed transaction. According to court documents, Cadillac Fairview had 14 leases with HBC, including some held under Ontrea Inc., another OTPP subsidiary:
- Richmond Centre / Richmond, British Columbia
- Market Mall / Calgary, Alberta
- Chinook Centre / Calgary, Alberta (Hudson's Bay)
- Chinook Centre / Calgary, Alberta (Saks Fifth Avenue)
- Polo Park Shopping Centre / Winnipeg, Manitoba
- Sherway Gardens / Etobicoke, Ontario (Hudson's Bay)
- Sherway Gardens / Etobicoke, Ontario (Saks Fifth Avenue)
- Markville Shopping Centre / Markham, Ontario
- Fairview Mall / North York, Ontario
- Masonville Place / London, Ontario
- Eaton Centre / Toronto, Ontario (Saks Fifth Avenue)
- Fairview Pointe Claire / Pointe Claire, Quebec
- Les Promenades St. Bruno / St. Bruno, Quebec
- Carrefour Laval / Laval, Quebec
Cadillac Fairview went on to say that it projects prospective loses in the hundreds of millions of dollars if the sale of the leases to Central Walk is approved. Last month, CF sold the Lime Ridge Mall in Hamilton — which was home to a Hudson's Bay store — to Primaris REIT for $416 million, although it is unclear if the sale had anything to do with HBC's insolvency.
According to CF, they met with Liu on June 2, but Liu failed to present a business plan. CF requested further information, but CF says Liu has not provided anything other than a brief letter on June 6. During last month's hearing for the three leases, HBC's senior lenders and the landlords agreed that they would not force the assignment of the remaining leases without consultation with the landlords, but CF says the lenders have since "declared their intent to seek approval of the Central Walk Transaction and pursue a non-consensual assignment of the remaining leases."
CF says it has not received the motion materials and requested the materials and Liu's business plans on July 18, but has not received so much as an acknowledgement as of July 22.
"Almost everything CF has learned about the Purchaser's proposed plans for the former HBC leases has come through the press and social media," said Cadillac Fairview. "If the Applicants wish to pursue this motion, they must provide their case diligently to allow a fair response. They have not."
Ruby Liu has been hosting a series of job fairs in Toronto. / Linda Quin, LinkedIn
Cadillac Fairview also voiced strong displeasure with the proposed timelines, saying that the Monitor — Alvarez and Marsal — and senior lenders have both proposed timelines that provide themselves with more time "to finalize a motion they have been working on for 2 months, than for the Landlords to respond to a motion they have never seen."
"The APA was executed two months ago. Presumably, the Applicants have been acting with due diligence to prepare their materials. They should produce these materials, together with supporting materials from Ms. Liu and the Purchaser, this week, i.e. no later than July 25. Central Walk consents to this timeline."
Cadillac Fairview has responded with its own proposed timeline that revises some of the case management deadlines, but does not change the targeted hearing date of September 11. Despite not yet receiving approval to take over all the leases, Liu and Central Walk have been hosting a series of job fairs in Toronto to secure staff and vendors, according to event invitations the company has sent to STOREYS.
