A group of Hudson’s Bay’s landlords don’t want to transfer more than two dozen leases to B.C. billionaire Weihong (Ruby) Liu, but the department store still has a chance to get its way.
The Bay, which filed for creditor protection in March, ran a process over the last several months to find buyers for leases belonging to it and Saks Canada. It agreed to sell up to 28 spaces to Liu.
Three leases were transferred to her without any hiccups because they’re in B.C. malls she owns, but another 25 are at properties held by a who’s who of Canadian commercial real estate firms.
Landlords for 23 of those sites oppose the transfer. Several have said in court they’ve been “very troubled” with their interactions with Liu and have had “no productive discussions, no meaningful disclosure.” Liu insists if the court hands her the leases, landlords will warm to her and her plan to open a new department store in their properties.
While the disagreement could serve as a roadblock to the Bay closing on its agreement with Liu, lawyers not involved in the case say the retailer has another route it can take to get a deal done.
That route lies in changes to the Companies’ Creditors Arrangement Act (CCAA) — Canada’s main insolvency law — made in 2009, said Jeff Lee, a Saskatoon-based partner at MLT Aikins LLP.
The changes laid out three criteria courts must consider when asked to assign leases to a new tenant.
Ruby Liu, a billionaire with a big vision, now has legal permission to take over the leases of three former Hudson’s Bay department stores located at three malls already under her ownership. For more on the new Bay benefactor, we’re joined by retail analyst Carl Boutet.
The first is whether or not the sale has the support of the monitor, a court-appointed, independent third party which helps guide businesses through creditor protection.
In the Bay’s case, the monitor is Alvarez & Marsal. It has yet to reveal whether it supports the Liu deal and did not respond to requests for comment.
“Before any court application is brought forward, typically the company will test that out with them,” Lee said. “They’re not going to just sort of fly in blind and hope for the best.”
The second aspect for the court to mull is whether the proposed new tenant is suitable. Lee said that’s determined by looking at whether they can perform the duties of the tenant and pay rent.
Liu, who made her money in Chinese real estate, appears to have deep pockets but her experience comes from being a landlord rather than a tenant.
The final aspect the…
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