Weihong Liu, who also goes by Ruby, announced a deal last month for Central Walk to acquire up to 28 Hudson’s Bay leases.Nathan Denette/The Canadian Press
Landlords who own former Hudson’s Bay stores decided to oppose a B.C. mall owner’s deal to take over their leases after recent meetings in which Weihong Liu was unable to provide details about how she will operate the stores, according to sources with knowledge of those meetings.
Ms. Liu, the chairwoman of Nanaimo, B.C.-based real estate investment company Central Walk, announced the deal last month to acquire up to 28 Hudson’s Bay leases through an affiliate company, Ruby Liu Commercial Investment Corp. That company, based in Richmond, B.C., filed an incorporation application with the B.C. Corporate Registry on May 1.
The transactions require landlords’ consent, as well as court approval.
At a court hearing in Toronto on Monday, Hudson’s Bay will seek approval for Ms. Liu’s $6-million deal to take over three of those leases – which are located in malls that Central Walk owns: the Mayfair Shopping Centre in Victoria, Tsawwassen Mills in Tsawwassen, just south of Vancouver, and the Woodgrove Centre in Nanaimo.
But other landlords have not agreed to hand over their spaces. Earlier this month, Ms. Liu held meetings with those landlords, according to court filings. After those meetings, on the week of June 9, landlords who represent 23 out of the 25 remaining leases wrote letters to Hudson’s Bay’s lawyers and the court monitor overseeing the process expressing concerns about the deal.
Those letters declared that “based on the information provided to date, those Landlords would not consent to the assignment of their Leases to the Potential Lease Purchaser and would oppose any potential future forced assignment,” according to a report filed by the court monitor, Alvarez & Marsal Canada Inc., on Thursday.
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In a press release in May, Central Walk described plans to launch “modern department stores” in the Hudson’s Bay spaces. At the recent meetings, Ms. Liu, who also goes by the name Ruby, told landlords she would call the stores “Ruby Liu,” and would offer a mix of fashion and jewellery products, dining spaces, and would host multiple events at the stores.
But two sources with knowledge of the landlords’ meetings with Ms. Liu said that she was unable to answer important questions about those plans, including whether she had secured vendors to supply products to the stores and who those suppliers are; where the funding will come from for urgent repairs to the locations, as well as to support the costs of launching and operating the stores; and what the procedures would be for distributing products to the stores.
The Globe is not naming the sources because they were describing confidential meetings.
A representative from Central Walk did not respond to a request for comment for this story.
According to one source, Ms. Liu said that she would allocate $3-million per store for repairs and renovations; both sources said that her financial plans were insufficient to cover the extent of the repairs that the sites require.
As Hudson’s Bay consistently lost money over the past decade, the retailer stopped spending money on upkeep of the stores. Repairs needed at the locations span everything from damaged or stained ceiling tiles, to broken HVAC systems, elevators and escalators.
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And Hudson’s Bay has indicated that bringing the stores up to proper operational condition will require significant investment. Earlier this year, when the retailer was pitching investors on a turnaround plan to save six of its stores, Hudson’s Bay indicated those six locations would require investments of $82-million in the first year alone. That figure was included in a confidential information memorandum prepared by the company in March, a copy of which was obtained by The Globe and Mail.
While that earlier turnaround plan included the e-commerce operations in addition to the stores, it indicates that the stores likely needed millions in spending to make them viable for the future.
Landlords were also concerned that Ms. Liu did not provide any evidence of experience running retail stores, which is a very different business from owning shopping centres, the sources said.
In the days after the meetings, Ms. Liu sent a letter to the landlords saying she intends to hire an executive team with retail experience, according to a third source who has a copy of the letter. The Globe is not naming the source because they were not authorized to discuss the confidential matter.
In the letter, Ms. Liu described a plan to hire 2,500 to 3,000 people to staff the stores. It also included a commitment to put in excess of $300-million in a bank account to fund the operations of the business, according to the source. The letter was sent prior to the landlords’ letters expressing their concerns.
Hudson’s Bay demise leaves large swaths of empty retail space in its wake
The shabbiness and declining sales of the Bay stores have been a drag on malls, which traditionally relied on department stores to act as anchor tenants that draw in traffic. While the millions of square feet of empty space that the Bay leaves behind are also a problem for landlords ‐ requiring investment to refurbish them to find new tenants ‐ mall owners are selective about filling those spaces with retailers that are likely to succeed, and to pay rent consistently in the long term.
And because anchor-tenant leases historically included valuable conditions ‐ such as below-market rents and rights of approval for developments elsewhere in the malls ‐ some landlords may prefer to take those leases back, invest in the spaces, and find new tenants that would pay significantly more than a retailer would pay under an acquired Hudson’s Bay lease.
At the time of the deal, Ms. Liu was vocal on Chinese social-media platform RedNote about wanting to launch stores called “New Bay” – a plan likely to run into trademark issues, according to legal experts.
Hudson’s Bay was granted court protection from its creditors on March 7, as the company struggled with mounting losses and $1.1-billion in debt. At the time, it operated 80 Bay stores across the country, as well as two Saks Fifth Avenue and 13 Saks Off 5th locations. All of those stores have now closed and thousands of Canadian employees have lost their jobs.
The court-supervised process to find buyers for the leases on the stores and distribution centres drew 12 bidders. Canadian Tire, which recently signed a $30-million deal to buy Hudson’s Bay’s intellectual property, also bid on some leases. No bids were received for 62 of the locations, where landlords are taking back control of the spaces.
In addition to Ms. Liu, another unnamed bidder is considering acquiring up to eight other leases in Ontario, Alberta, Saskatchewan and Manitoba, according to the monitor’s report. Discussions related to that potential deal are continuing, “have generally been positive,” and have received consent from at least one landlord, the report said.
With reports from Andrew Willis and Rachelle Younglai