The Hudson's Bay Company (HBC) and its senior lenders have officially filed a motion in Ontario Superior Court seeking court approval for its proposed lease transaction with Central Walk, the company chaired by BC-based, Chinese billionaire Ruby Liu.
After the Hudson's Bay Company 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, and Saks OFF 5th brands — were liquidated and eventually closed, while stakeholders began the process of seeking out bids for Hudson's Bay's leases.
The lease monetization process consisted of two phases. After the first phase, 18 parties submitted bids pertaining to 65 individual leases (with overlapping interest in certain locations). The bids were 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 for 28 of the leases.
These lease sales have been contingent on consent from the landlords and last month Ruby Liu was able to secure consent and court approval to acquire three of the 28 leases through Ruby Liu Commercial Investment Corp. for $2 million each with a grand total of $6 million. However, those three leases were for locations within the three malls — Tsawwassen Mills, Woodgrove Centre, and Mayfair Shopping Centre — in British Columbia that Central Walk owns, so landlord consent was a foregone conclusion.
Regarding the remaining 25 leases, Liu has had much more trouble securing consent, with many opposing the transaction. Most vocal of the landlords has been Cadillac Fairview (CF), the real estate subsidiary of the Ontario Teachers' Pension Plan and one of the largest owners and operators of large regional malls in Canada. In a court filing last week, CF said it was "resolutely opposed" to the transaction, calling Liu an "untested anchor tenant" with "a deeply flawed retail concept." Despite not receiving approval, Liu has been holding a series of hiring fairs for employees and vendors in Toronto, according to invitations sent to STOREYS.
Ruby Liu's Business Plan
Ruby Liu at a hiring fair in Toronto this month. / Linda Qin, LinkedIn
According to Cadillac Fairview, Ruby Liu had also initially failed to provide full details of Central Walk's business plan. However, according to court documents, the company has now done so.
"Central Walk has committed to making an initial equity investment of $375 million to fund the Business Plan and the operations of its stores," said Franco Perugini, SVP of Real Estate & Legal for Hudson's Bay in an affidavit. "Of this amount, approximately $120 million is dedicated to renovations that will revitalize and upgrade the existing premises, including with respect to physical upgrades, exterior renovations, lighting, signage, flooring, HVAC, washrooms, accessibility, and technology systems."
Perugini went on to say that both he and Lou Ampas, the Divisional Vice-President of Construction for Hudson's Bay, will be joining Central Walk's real estate team, subject to court approval of the transaction, adding that they together have over 50 years of relevant experience. Other Hudson's Bay employees that are expected to join Central Walk include Mithun Sinharoy as COO and Lei Wang as VP of Sourcing and Procurement.
"As part of a coordinated transition, Central Walk estimates that it will need to hire approximately 1,800 employees across the 25 re-launched department stores," Perugini added. "To date, over 1,100 resumes, including 700 from current and former employees of Hudson’s Bay, have been received. More than 300 first round interviews have been completed."
Regarding the overall vision, Perugini said that Central Walk "intends to operate its stores in a manner consistent with how Hudson’s Bay has historically operated its stores" and that their vision "is that its stores will be a lifestyle focused, integrated department store with a unique shopping experience."
"Central Walk is contemplating three categories of stores: (a) flagship; (b) platinum; and (c) standard," he said. "This strategy is intended to permit Central Walk to serve a wide range of demographics thereby mitigating potential weakness in any one category. The estimated renovation timeline for the Flagship stores is twelve months. The estimated renovation timeline for the Platinum stores and Standard stores is six months."
"Central Walk has and continues to leverage relationships with former suppliers of Hudson’s Bay and create new supplier partnerships to source quality product offerings," he said, speaking on the supply chain component of the business plan. "To date, Central Walk has received signed expressions of interest from over 60 suppliers. These suppliers include leading Canadian and global fashion, wellness, home, and lifestyle brands, demonstrating wide-ranging support from suppliers to supply the Central Walk department stores."
"Central Walk’s vision is that its stores will appeal to an audience across all ages and demographics, with a broad range of product categories, while ensuring all such products and store operations will comply with the applicable CW Lease requirements. Upon closing of the CW Transactions, Central Walk will proceed to begin issuing purchase orders for products. Suppliers have advised that the fulfillment timelines range from one to six months. Given the expedited timelines, priority will be placed on sourcing local products and suppliers with existing inventory on hand to ensure sufficient merchandise is available for store openings."
The Central Walk Bid
The Hudson's Bay store at the Hillcrest Mall in Richmond Hill, Ontario. / JHVE Photo, Shutterstock
To date, full details of the transaction have also not been revealed in court documents, but a list of the 25 leases and the prices were finally disclosed in court filings this week. The proposed transaction, which the business plan is contingent on, is set to be heard by the Ontario Superior Court on August 28 and 29.
Central Walk's bid, again made through Ruby Liu Commercial Investment Corp., is $69.1 million for the 25 leases. Although there are 25 leases, there are just nine landlords. The landlords, the total price allocated for their leases, and the amount of leases are as follows:
- Cadillac Fairview / $23,300,000 / 7 leases
- Primaris REIT / $8,299,999/ 5 leases
- Morguard / $13,999,999 / 4 leases
- Oxford Properties / $7,166,668 / 3 leases
- Ivanhoe Cambridge / $6,000,000 / 2 leases
- Triple Five / $3,833,334 / 1 lease
- QuadReal Property Group / $2,833,333 / 1 lease
- Cushman & Wakefield / $1,833,333 / 1 lease
- Westcliff / $1,833,334 / 1 lease
The complete list of the 25 locations, the individual purchase prices, the sizes of the properties, the monthly rent, the lease expiry dates, and the landlords are as follows:
1. St. Laurent Shopping Centre, Ottawa, ON
- Price: $5,000,000
- Size: 145,074 sq. ft
- Approximate Gross Monthly Rent: $130,519
- Lease Current Expiry: March 12, 2026
- Lease Final Expiry: March 12, 2091
- Landlord: Morguard
2. Hillcrest Mall, Richmond Hill, ON
- Price: $4,500,000
- Size: 136,915 sq. ft
- Approximate Gross Monthly Rent: $244,827
- Lease Current Expiry: August 7, 2034
- Lease Final Expiry: August 7, 2094
- Landlord: Oxford Properties
3. Chinook Centre, Calgary, AB
- Price: $4,833,334
- Size: 206,514 sq. ft
- Approximate Gross Monthly Rent: $387,934
- Lease Current Expiry: June 8, 2033
- Lease Final Expiry: June 8, 2083
- Landlord: Cadillac Fairview
4. CF Market Mall, Calgary, AB
- Price: $4,833,334
- Size: 200,000 sq. ft
- Approximate Gross Monthly Rent: $219,888
- Lease Current Expiry: September 30, 2031
- Lease Final Expiry: September 30, 2091
- Landlord: Cadillac Fairview
5. Sherway Garden, Toronto, ON
- Price: $4,333,333
- Size: 223,477 sq. ft
- Approximate Gross Monthly Rent: $420,027
- Lease Current Expiry: June 30, 2033
- Lease Final Expiry: June 30, 2203
- Landlord: Cadillac Fairview
6. West Edmonton Mall, Edmonton, AB
- Price: $3,833,334
- Size: 164,250 sq. ft
- Approximate Gross Monthly Rent: $252,689
- Lease Current Expiry: September 15, 2031
- Lease Final Expiry: September 15, 2081
- Landlord: Triple Five
7. Centerpoint Mall, Toronto, ON
- Price: $3,833,333
- Size: 122,502 sq. ft
- Approximate Gross Monthly Rent: $97,312
- Lease Current Expiry: April 30, 2034
- Lease Final Expiry: April 30, 2074
- Landlord: Morguard
8. Southgate Shopping Centre, Edmonton, AB
- Price: $3,500,000
- Size: 236,551 sq. ft
- Approximate Gross Monthly Rent: $285,068
- Lease Current Expiry: October 14, 2026
- Lease Final Expiry: October 14, 2076
- Landlord: Primaris REIT (acquired the mall earlier this year)
9. Guildford Town Centre, Surrey, BC
- Price: $3,500,000
- Size: 174,462 sq. ft
- Approximate Gross Monthly Rent: $154,422
- Lease Current Expiry: June 8, 2033
- Lease Final Expiry: June 8, 2083
- Landlord: Ivanhoe Cambridge
10. Willowbrook Shopping Centre, Langley, BC
- Price: $2,833,333
- Size: 131,146 sq. ft
- Approximate Gross Monthly Rent: $114,388
- Lease Current Expiry: August 31, 2027
- Lease Final Expiry: August 31, 2087
- Landlord: QuadReal Property Group
11. Richmond Centre, Richmond, BC
- Price: $2,833,333
- Size: 169,692 sq. ft
- Approximate Gross Monthly Rent: $262,651
- Lease Current Expiry: April 30, 2034
- Lease Final Expiry: April 30, 2094
- Landlord: Cadillac Fairview
12. Fairview Mall, Toronto, ON
- Price: $2,833,333
- Size: 152,420 sq. ft
- Approximate Gross Monthly Rent: $176,039
- Lease Current Expiry: October 31, 2027
- Lease Final Expiry: October 31, 2087
- Landlord: Cadillac Fairview
13. Markville, Markham, ON
- Price: $2,833,333
- Size: 140,094 sq. ft
- Approximate Gross Monthly Rent: $112,555
- Lease Current Expiry: October 31, 2035
- Lease Final Expiry: October 31, 2085
- Landlord: Cadillac Fairview
14. Bramalea City Centre, Brampton, ON
- Price: $2,833,333
- Size: 131,438 sq. ft
- Approximate Gross Monthly Rent: $120,383
- Lease Current Expiry: March 31, 2029
- Lease Final Expiry: March 31, 2074
- Landlord: Morguard
15. Mapleview Centre, Burlington, ON
- Price: $2,500,000
- Size: 129,066 sq. ft
- Approximate Gross Monthly Rent: $128,574
- Lease Current Expiry: September 30, 2030
- Lease Final Expiry: September 30, 2090
- Landlord: Ivanhoe Cambridge
16. Coquitlam Centre, Coquitlam, BC
- Price: $2,333,333
- Size: 120,086 sq. ft
- Approximate Gross Monthly Rent: $101,266
- Lease Current Expiry: August 14, 2029
- Lease Final Expiry: August 14, 2079
- Landlord: Morguard
17. Oshawa Centre, Oshawa, ON
- Price: $2,000,000
- Size: 122,624 sq. ft
- Approximate Gross Monthly Rent: $131,682
- Lease Current Expiry: August 31, 2028
- Lease Final Expiry: August 31, 2057
- Landlord: Primaris REIT (acquired the mall earlier this year)
18. Southcentre Mall, Calgary, AB
- Price: $1,833,334
- Size: 164,514 sq. ft
- Approximate Gross Monthly Rent: $260,758
- Lease Current Expiry: July 6, 2029
- Lease Final Expiry: September 28, 2074
- Landlord: Oxford Properties
19. Fairview Park, Kitchener, ON
- Price: $1,833,334
- Size: 184,714 sq. ft
- Approximate Gross Monthly Rent: $132,650
- Lease Current Expiry: August 19, 2030
- Lease Final Expiry: August 19, 2060
- Landlord: Westcliff
20. Bayshore Shopping Centre, Ottawa, ON
- Price: $1,833,333
- Size: 180,696 sq. ft
- Approximate Gross Monthly Rent: $185,880
- Lease Current Expiry: August 31, 2033
- Lease Final Expiry: August 31, 2073
- Landlord: Cushman & Wakefield
21. Orchard Park Shopping Centre, Kelowna, BC
- Price: $1,333,333
- Size: 127,290 sq. ft
- Approximate Gross Monthly Rent: $121,751
- Lease Current Expiry: July 31, 2032
- Lease Final Expiry: July 31, 2092
- Landlord: Primaris REIT
22. Upper Canada Mall, Newmarket, ON
- Price: $833,334
- Size: 142,780 sq. ft
- Approximate Gross Monthly Rent: $205,678
- Lease Current Expiry: March 27, 2030
- Lease Final Expiry: March 27, 2090
- Landlord: Oxford Properties
23. Lime Ridge Mall, Hamilton, ON
- Price: $833,333
- Size: 125,307 sq. ft
- Approximate Gross Monthly Rent: $167,294
- Lease Current Expiry: May 1, 2030
- Lease Final Expiry: March 1, 2100
- Landlord: Primaris REIT (acquired the mall in June)
24. Masonville Place, London, ON
- Price: $800,000
- Size: 84,928 sq. ft
- Approximate Gross Monthly Rent: $71,333
- Lease Current Expiry: August 31, 2035
- Lease Final Expiry: August 31, 2085
- Landlord: Cadillac Fairview
25. Conestoga Mall, Waterloo, ON
- Price: $633,333
- Size: 130,580 sq. ft
- Approximate Gross Monthly Rent: $167,317
- Lease Current Expiry: September 18, 2028
- Lease Final Expiry: September 18, 2108
- Landlord: Primaris REIT
