B.C.-based billionaire Ruby Liu has lost a fight in an Ontario court over acquiring former Hudson’s Bay properties to open a new department store chain.
Ontario Superior Court judge Peter Osborne ruled on Oct. 24 that landlords of former Hudson’s Bay Company (HBC) properties will not be required to accept Liu as a tenant.
Osborne said he had “significant concerns” about Liu’s ability to meet the terms of the leases. In a 48-page decision document, Osborne also said he found the arguments by landlords, who have been fighting Liu’s bid to take over the properties, “compelling.”
While both parties are able to appeal the decision, neither has announced plans to do so yet.
Osborne’s decision comes after reviewing 25,600 pages of arguments from HBC, commercial landlords, and investors.
HBC didn’t find a buyer and later liquidated its 80 stores, as well as 16 more from Saks. It then turned its attention to assets such as its leases, intellectual property, and art. The company’s stores shut down permanently across Canada following the final day of liquidation sales on June 1.
A lease-bidding process resulted in a dozen bids for 39 properties. While YM Inc., which owns mall brands like Bluenotes, took five leases for $5.03 million, and a landlord took one for $20,000, the biggest bid came from Liu, who has dreamed of opening a new department store chain named after herself.
Landlords’ Concerns
The assigning of the lease locations was conditional upon landlord consents and court approval. Liu said she wanted to launch a new modern department store concept “aimed at fostering intergenerational connections, promoting active lifestyles, and empowering youth.”Liu won court approval for three of those locations, which were at properties in B.C. malls that she owns. She has been battling with the landlords for the remaining 25 locations.
Following HBC’s announcement that it would sell the leases to Liu for $69.1 million, landlords including Cadillac Fairview Corp. Ltd., Ivanhoé Cambridge, and Oxford Properties met with Liu and came away with a number of objections.
Most of the landlords said they found Liu to be unprepared, noting that she didn’t initially supply them with a business plan. Liu told the media she would create a department store with dining, entertainment, and recreation spaces, but the landlords said those activities wouldn’t be allowed under the leases she was aiming to take over.
Decision
“The overall lack of experience at the leadership level represents a significant risk to the operational viability of launching and managing 25 large department stores in the contemplated timeline,” Osborne wrote in his Oct. 24 decision, noting that the business plan Liu presented was “superficial” and that an updated one “remains deficient.”The first plan estimated Liu could have at least 20 of the stores renovated and operating within 180 days of lease signing, which the landlords said was unachievable due to the state the stores were in. The landlords also argued that Liu’s $400 million budget for the project wouldn’t suffice, as her malls were $19 million in debt over the last two years.
Meanwhile, Liu said her three malls proved that she has what it takes. She argued that the landlords were battling with her because she’s an “outsider” and not their preferred tenant.
The monitor said it thought Liu could meet her financial obligations but that there was a “very real risk” she wouldn’t be able to succeed with the “monumental” task, noting her lack of experience and preparedness.
