One of Canada’s largest real estate investment trusts says it is ready to make use of vacant space if Hudson’s Bay Co. stores are liquidated, but calls the retailer’s creditor-protection filing “disappointing.”
In a press release on Tuesday, RioCan REIT detailed its exposure to Hudson’s Bay properties as both a landlord to the store chain, and through a joint venture established in 2015 that gave RioCan a minority stake in some of the retailer’s real estate.
The properties in that joint venture are “prime real estate” whether they continue their use as stores or are redeveloped, RioCan president and chief executive officer Jonathan Gitlin wrote in the release.
“Our team has a proven track record of finding solutions for vacant space and will work to protect the value of the real estate in the JV,” Mr. Gitlin wrote.
Facing a financial crisis, Hudson’s Bay was granted protection from its creditors on March 7. The Globe and Mail first reported last week that the retailer was working on a plan to save roughly half of its 80 department stores. But Hudson’s Bay was unable to obtain the financing that would have required.
On Friday night, the company announced that an emergency loan it had secured provided only a limited amount that would require the full liquidation of the entire business. In addition to its 80 namesake stores, Hudson’s Bay operates 16 Saks Fifth Avenue and Saks Off 5th stores under licence from Saks Global in the U.S.
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On Monday, the retailer went to court to seek approval to extend the creditor-protection process and to begin liquidation. A lawyer for Hudson’s Bay told the court that the company still hoped to find an alternative solution, and that stores could be removed from liquidation in that case.
Ahead of the Monday hearing, RioCan filed court documents objecting to the initial order granting protection to Hudson’s Bay under the Companies’ Creditors Arrangement Act (CCAA). That order allowed Hudson’s Bay to suspend rent payments to the joint venture, which holds 12 properties where the stores occupy the space. According to the documents, RioCan is the only landlord in this position.
“We should not be at the back of the bus,” Robert Chadwick, a lawyer with Goodmans LLP representing RioCan, said at Monday’s hearing. Hudson’s Bay owes roughly $10-million in rent per month to the joint venture for the space it occupies, according to the documents.
RioCan agreed to invest $325-million in 2015 in exchange for a stake in 10 freehold and leased Hudson’s Bay properties. Those include the downtown stores in Vancouver, Montreal, Calgary and Ottawa, and leased properties in malls including Yorkdale Shopping Centre and Scarborough Town Centre in Toronto, Carrefour Laval in Laval, Que., and Square One Shopping Centre in Mississauga. RioCan holds a 22-per-cent stake in the assets. The joint venture and RioCan each hold a 50-per-cent stake in two further properties. The companies also hold mortgages on those properties.
In total, Hudson’s Bay carried $724.4-million in mortgage debt as of March 7, according to court filings. The retailer also had $430-million outstanding under three credit facilities as of that date, for a total of $1.1-billion in outstanding secured debt obligations.
The original goal of the joint venture was to expand by acquiring additional properties, eventually converting the portfolio into a publicly traded REIT, according to RioCan’s court filing. But by mid-2017, the main purpose of the venture was to manage and lease the existing 12 properties.
Through the joint venture and an additional RioCan property outside that venture, Hudson’s Bay locations represent 842.4 million square feet of net leasable area where RioCan owns at least a partial stake, according to the release.
Since 2015, RioCan has provided additional financing to Hudson’s Bay through the joint venture. That included a $30-million bridge loan in late 2023 that was repaid in 2024 in connection with a mortgage refinancing by one of the joint venture’s subsidiaries; a $19.5-million mezzanine loan to partly repay a maturing mortgage in February of last year; a $16.7-million mezzanine loan to the venture in October of 2024 and a guarantee on $56.5-million in mortgage financing on a property on the same day, according to the court filing.
According to its filing, RioCan also proposed providing financing under the CCAA process to facilitate rent payments to the joint venture.
RioCan is not the only landlord that has provided support to Hudson’s Bay in the past. In 2023, the retailer received a $200-million term loan from Cadillac Fairview Corp. – the only party willing to provide financing at the time, according to court filings by Hudson’s Bay.
Even before filing for creditor protection, Hudson’s Bay had fallen behind on rent payments on its stores. On March 7, a landlord locked Hudson’s Bay out of a store in Sydney, N.S., and a team of bailiffs attempted to seize merchandise at another location in CF Sherway Gardens mall in Toronto, according to an affidavit sworn by Hudson’s Bay chief financial officer Jennifer Bewley.
While RioCan has emphasized that it can work with vacant spaces, the prospect of liquidation sales is a serious concern for landlords. At Monday’s court hearing, a lawyer representing Cadillac Fairview said that such sales can devalue the image of malls, and can hurt other tenants as merchandise is offered at sizable discounts. That in turn can affect what landlords can charge to tenants.
Joseph Pasquariello, another Goodmans lawyer representing RioCan, questioned whether Hudson’s Bay had cast a wide enough net in its search for solutions to avoid a liquidation.
“We don’t want to set up a system that’s doomed to fail from the get go,” he said.
Share your memories and thoughts about The Bay
The Hudson's Bay Co. is literally older than Canada itself, and people from coast to coast have grown up with various versions of the store and its iconic striped merchandise. Do you have a strong memory involving The Bay to share? Perhaps you registered for your wedding or made a meaningful purchase there, worked at a location or simply recall a different time for department stores. We want to hear about it. If you'd like to send us a photo related to your submission, send it to us in an email at audience@globeandmail.com with “Bay memories” in the subject line.