Billionaire Weihong (Ruby) Liu in Tsawwassen, B.C., on June 26. Hudson’s Bay Co. is seeking court approval to sell Ms. Liu 25 store leases in a $69.1-million deal.DARRYL DYCK/The Canadian Press
Hudson’s Bay Co. is pushing ahead with seeking court approval to sell 25 store leases to B.C. billionaire Weihong (Ruby) Liu, despite court filings that reveal the retailer considered terminating the deal after accusing Ms. Liu’s company of breaching their agreement.
The newest court documents show the deal is worth $69.1-million and includes a plan to open “Ruby Liu” department stores in 15 former Bay stores in Ontario, as well as five in Alberta and five in British Columbia. The locations include high-profile malls such as CF Sherway Gardens in Toronto, Ottawa’s St. Laurent Shopping Centre, CF Chinook Centre and CF Market Mall in Calgary, and West Edmonton Mall and Southgate Shopping Centre in Edmonton.
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Ms. Liu, the owner of real estate investment company Central Walk, based in Nanaimo, B.C., has already paid $6-million for three Bay leases in malls that Central Walk owns. But the deal for the rest of the stores has faced significant opposition from landlords and from some Hudson’s Bay lenders, who have asked the court to quash it.
The plans for the Ruby Liu stores are brick-and-mortar only; the company will not operate an e-commerce business, according to an affidavit from Adam Zalev, co-founder and managing director of Reflect Advisors LLC, the financial adviser that has handled the court-supervised process to sell off the Bay leases. Ms. Liu has been seeking approval from landlords to take over the spaces.
A rendering of the proposed department stores from a business plan prepared by Central Walk.Supplied
But at meetings in early June, some landlords proved “noticeably closed-minded to my vision,” according to an affidavit sworn by Ms. Liu on Tuesday, which reveals just how tense those discussions were at times. According to her account, the team from Cadillac Fairview, one of Canada’s largest commercial real estate companies, walked out of a meeting after “barely five minutes,” despite Ms. Liu’s attempt to block the door.
Ms. Liu also had disagreements with Hudson’s Bay, which noted in a July 5 letter from its legal counsel that Ms. Liu had “failed to provide adequate responses to basic questions” from the landlords, and accused Central Walk of breaching its agreement, after refusing to “take the most basic and necessary steps to advance its bid.” The court documents show that Hudson’s Bay threatened to terminate the deal.
But in documents filed on Tuesday, Hudson’s Bay noted that Central Walk has done work recently to update its business plan. The retailer argues that the deal should be approved, saying that it would benefit a number of parties: lenders who will be repaid tens of millions, landlords who will receive rent payments from Ms. Liu totalling $4.7-million a month and Canadians who will be hired for approximately 1,800 jobs with the Ruby Liu department stores – including former Hudson’s Bay employees.
Ms. Liu’s plan would also avoid the “blight” of shuttered department stores sitting empty while landlords redevelop the spaces, and would provide $120-million in overdue repairs and renovations of those spaces, according to the Hudson’s Bay court filings.
Amid the opposition to the deal, Ms. Liu has been admonished for “inappropriate” communications with the judge overseeing the court process.
Court filings show that Justice Peter Osborne received e-mails from Ms. Liu and from Central Walk’s chief executive officer, Linda Qin, that accused the lawyers representing other parties in the case of “corruption” and praised the judge for his “grace,” his “quiet but commanding presence” and his “nobility.” At a hearing earlier this month, Justice Osborne reminded Ms. Liu and Ms. Qin that no party in the case should be communicating directly with him.
Tuesday’s filings also confirm that Hudson’s Bay agreed to reduce the purchase price for the 25 leases by $3-million, allowing Central Walk to use part of its deposit to hire new legal counsel and “external advisors.” Since that price reduction, Central Walk has hired “an experienced retail consultant,” according to the retailer’s court filing, which does not name that person. An earlier court filing on Tuesday included correspondence from Ms. Liu saying that Hudson’s Bay had told the company to engage former Bay CEO Liz Rodbell as a consultant.
The exterior of the proposed department stores from Central Walk's business plan.Supplied
The documents show Ms. Liu’s business plan involves an equity capital investment of $375-million to launch the stores, including the money set aside for store renovations and repairs, as well as $135-million to buy products to stock the locations. Central Walk has seen interest from more than 60 product vendors, according to the filing.
Ms. Liu’s affidavit states that her personal net worth exceeds $1-billion, and that she currently has liquid assets of approximately $303-million. The court documents include letters from Bank of Montreal and a bank in Singapore confirming her recent account balances. Before moving to Canada in 2014, Ms. Liu had a commercial real estate development business in Shenzhen, China, and sold a mall she built there for the equivalent of $1.32-billion, according to the document.
Ms. Liu’s affidavit also stated that she is willing to sell two of the three malls that Central Walk owns to ensure there are sufficient funds to build the department stores.
Landlords have argued that while Ms. Liu has developed and owned shopping malls, she lacks experience operating a retail business – something that would be crucial for a chain of this size.
“My experience operating the three shopping malls has given me a profound understanding of the retail landscape in Canada and sparked my interest and passion for this important sector which finds itself at a historical crossroads,” Ms. Liu’s affidavit stated.
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If the deal is approved, Ms. Liu plans to begin opening stores next year, with all operations running by 2027. Financial forecasts provided as part of the company’s latest business plan estimate the stores will reach profitability by just their second year of operations, drawing more than $420-million in sales in 2027 and approximately $6.5-million in earnings before interest, taxes, depreciation and amortization.
Central Walk has also hired four outgoing Hudson’s Bay executives with experience managing the retailer’s supply chain, real estate, construction projects and import operations.
Struggling with mounting losses and $1.1-billion in debt, Hudson’s Bay filed for court protection from its creditors on March 7. After Canada’s oldest retailer was unable to secure investment for a plan to rescue some of its stores, the Bay closed all of its locations across the country in early June.
Hudson’s Bay will seek court approval on Thursday for two other deals to sell five leases to clothing retailer YM Inc. for $5.03-million, and one lease to landlord Ivanhoe Realties Inc. for $20,000 at a mall owned by parent company Ivanhoé Cambridge.
A court hearing into the Central Walk lease deal has been scheduled for Aug. 28.