A British Columbia billionaire who spent the summer fighting to move into former Hudson Bay properties found herself on the losing end of an Ontario Superior Court decision Friday.
Judge Peter Osborne ruled that the owners of the collapsed retailer will not be forced to accept Ruby Liu as a tenant.
While no one immediately announced plans to appeal the decision, the losing party could try to overturn the result.
In his view, Osborne said he had “significant concerns” about Liu’s ability to meet the terms of the leases he wanted.
Major landlords including Cadillac Fairview, Oxford Properties and Ivanhoé Cambridge opposed Liu’s purchase of 25 former Hudson Bay leases for $69.1 million.
Osborne’s decision was months in the making and came after reading 25,600 pages of arguments from a who’s who of business owners and investors.
It was in March when Hudson Bay, plagued by $1.1 billion in debt, filed for creditor protection. Unable to find a buyer, it subsequently liquidated its 80 stores and 16 more Saks stores, and then turned its attention to assets such as its leases, intellectual property and art.
A leasing bidding process netted a dozen bids for 39 properties. YM Inc., owner of shopping center brands such as Bluenotes, picked up five for $5.03 million. One owner snapped one up for $20,000.
But the biggest offer came from Liu, who dreamed of opening a new department store chain bearing his name. He wanted up to 28 leases to accomplish the feat, and in May, the Bay announced it was willing to sell them to him.
Three of them easily won court approval because they were on properties in British Columbia shopping centers that Liu owns: Woodgrove Centre, Mayfair Shopping Center and Tsawwassen Mills.
Ruby Liu, a billionaire with a big vision, is now legally permitted to take over the leases of three former Hudson’s Bay department stores located in three shopping centers she already owns. For more on Bay’s new benefactor, we’re joined by retail analyst Carl Boutet.
The remaining 25 became one of the most controversial issues in the Bay Area crisis. Almost as soon as Bay announced they would sell the leases to Liu for $69.1 million, the owners met with her and raised a wide range of objections.
Most said they caught her off guard. They said he had no business plan and had a team of inexperienced executives who had spent time as real estate agents and children’s educators rather than retail leaders. Additionally, they said Liu’s plans for dining, entertainment and recreation were not permitted under the leases she wanted to take over.
When Liu put together a business plan, he estimated he could renovate at least 20 of his stores (from the run-down state Bay left them in) and operate within 180 days of signing the lease.
The owners thought the schedule was unattainable and argued that their $400 million budget for the project (money they doubted they had available because their malls were $19 million in debt over the past two years) wouldn’t be enough either.
Liu, who made his fortune in Chinese real estate before immigrating to Canada, said his three shopping centers show he has what it takes. She argued that the landlords were fighting her because she is an “outsider” and not their preferred tenant.
The Bay and Pathlight Capital, the lender that would recover the most from Liu’s deal, said the owners objected because they wanted their properties back. If they were to take control again, they could lease their most venerable spaces to their chosen tenants, and could charge far more than the below-market rents in Bay Area leases, some of which last for decades.
British Columbia billionaire Ruby Liu hopes to expand her shopping center empire by acquiring 28 leases of former retail spaces in Hudson Bay. He joined CBC’s Gloria Macarenko with a translator to share his take on department stores, in his first interview with English-speaking media in Canada.
Returning the properties would also allow owners to divide the spaces into multiple smaller units for multi-tenant use or redevelop them into residential or mixed-use spaces.
In making his decision, Osborne had to consider section 11.3 of the Companies’ Creditors’ Arrangements Act, which allows the court to allocate leases to a prospective tenant against the landlords’ objections.
The section asked him to reflect on whether Liu is an “appropriate” buyer who will be able to meet the lease obligations and whether his deal has the support of the monitor, a court-appointed independent third party that periodically reviews the Bay’s creditor protection.
Monitor Alvarez & Marsal had said it thought Liu would be able to meet all of her financial obligations, but added that there is a “very real risk” that she will not be able to succeed in the “monumental” task because she is inexperienced and unprepared.
