While Primaris REIT, Morguard, and several other of Canada's largest mall owners are trying to fend off a forced takeover of their Hudson's Bay spaces, RioCan REIT (TSX: REI.UN) is occupied with separating themselves from their joint venture with Hudson's Bay and a picture of what that separation will look like is now coming into view.
The joint venture between RioCan and Hudson's Bay was formed in 2015 with each partner contributing some of their real estate assets. Hudson's Bay contributed 10 properties — five it owned via freehold (inclusive of the land) and five it owned via leasehold (not inclusive of the land) while RioCan contributed a 50% co-ownership interest in two of its malls in Ontario plus cash.
As of March 2025, when Hudson's Bay filed for creditor protection under the Companies' Creditors Arrangement Act (CCAA), the ownership split was 78.0136% and 21.9864% and the RioCan-Hudson's Bay joint venture owned the following 12 properties:
- Downtown Vancouver - Vancouver, British Columbia (Freehold)
- Downtown Calgary - Calgary, Alberta (Freehold)
- Downtown Montreal - Montreal, Quebec (Freehold)
- Downtown Ottawa - Ottawa, Ontario (Freehold)
- Devonshire Mall - Windsor, Ontario (Freehold)
- Georgian Mall - Barrie, Ontario (Freehold, 50%)
- Oakville Place - Oakville, Ontario (Freehold, 50%)
- Square One - Mississauga, Ontario (Leasehold)
- Scarborough Town Centre - Scarborough, Ontario (Leasehold)
- Yorkdale - North York, Ontario (Leasehold)
- Carrefour Laval - Laval, Quebec (Leasehold)
- Les Promenades - St. Bruno, Quebec (Leasehold)
After a dispute over rent payments and then disclosing that it had suffered a $209 million loss in its investment in the joint venture with Hudson's Bay, RioCan filed an application in May to place the joint venture under receivership, giving RioCan more control than they had in the CCAA proceedings.
The joint venture entity was officially placed under receivership on June 3 and the Receiver has since been working on the next steps of the proceedings, which were outlined in a report to the court dated August 18.
Georgian Mall and Oakville Place
According to the Receiver, it entered into term sheets with RioCan on August 14 that would see RioCan acquire the joint venture's ownership interest in the Georgian Mall in Barrie and Oakville Place in Oakville, subject to a marketing period during which the Receiver will seek out alternative superior transactions, meaning RioCan's bid will serve as a stalking horse bid.
Under the joint venture, RioCan provided 50% stakes in the two Ontario malls to the joint venture, owned the remaining 50% on its own, and served as the managing partner for both properties. Thus, if the buyout is completed, RioCan would have full ownership of the two malls.
As previously reported by STOREYS, the joint venture had a first-ranking mortgage held by TD Bank and Canada Life Assurance Company for the original principal amount of $87,400,000. The mortgage was set to mature this month, but the Receiver entered into a renewal agreement with the lenders on July 22 that extended the maturity date of the loan for three months.
The Georgian Mall in Barrie, Ontario. / RioCan
The Freehold Properties
The crown jewels of the joint venture are the properties co-owned by RioCan and Hudson's Bay, most of which are iconic heritage buildings in downtown cores. For the time being, however, the fate of those properties remain unknown, largely due to the state of disrepair the properties are in, which would limit their value if put on the market.
Thus, the Receiver is currently working with RioCan to perform critical on-site maintenance and other tasks in order to "ensure the continuity of utility services" for the properties. The Receiver and RioCan are currently considering the possibility of obtaining a building condition assessment to get professional insight into the properties, with the goal of eventually marketing the properties.
"Due to the highly complex nature, large size, existing state, and age of each of the Owned Real Properties – requiring extensive assessment by current stakeholders and extensive diligence by interest parties – it is unlikely that a near-term solution is practical or achievable in the circumstances for most of the Owned Real Properties," said the Receiver.
The Leasehold Properties
Last but not least are the five leasehold properties, which are five Hudson's Bay locations located in Ontario and Quebec. On this front, the Receiver has consulted with the various parties involved in the lease monetization process in the Hudson's Bay CCAA proceedings, engaged with the landlords to see if there is interest in lease surrender transactions, and also engaged RioCan to determine if there are potential tenants to take over the space.
In late-June, the Receiver reached out to 12 parties it believed would be reasonably interested in the properties and asked for offers to be submitted by July 16. No transactions were secured for the Square One and Scarborough Town Centre properties, but transactions have been secured for the remaining three leasehold properties, pending court approval.
For the two leasehold properties in Quebec, the transactions are lease surrender agreements with the landlord, Cadillac Fairview. Lease surrender agreements usually entail the landlord and the tenant agreeing on terms to terminate a lease early. The third transaction is pertaining to the Yorkdale property in Ontario and will be a sublease arrangement with Fairweather Ltd., an established retailer with over 100 locations that intends to operate the space as a Les Ailes De La Mode.
These three transactions will be subject to future motions while RioCan's buyout of Hudson's Bay from the Georgian Mall and Oakville Place are subject to the court approving the sales process.
