Hudson’s Bay landlords don’t want Liu to move in, but retailer still has a shot

Billionaire Ruby Liu listens during an interview at a former Hudson's Bay-owned Saks Off 5th department store after a "handover ceremony" where she received the keys to the space at Tsawwassen Mills shopping mall that she owns, in Tsawwassen, B.C., on Thursday, June 26, 2025. (Darryl Dyck / The Canadian Press)

TORONTO — A group of Hudson’s Bay’s landlords don’t want to transfer about two dozen leases to British Columbia billionaire 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 — 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.

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 court will consider is whether a transfer of a lease to Liu is “appropriate.”

Lee said people should think of it as asking this question: “Is what’s proposed for this post-assignment lease relationship what people signed up for, or are they seeking to rewrite the lease or change the playing field so radically that it’s not appropriate?”

That’s where much of the tension could lie in the Bay case.

“You can’t go into CCAA as a tenant and then force your landlords to renegotiate their leases as a result,” said Peter Tolensky, a Vancouver-based partner at Lawson Lundell LLP.

The Canadian Press obtained a document last week that Liu’s lawyer sent landlords outlining her plans. It says she will take on the leases on an “as is, where is” basis but doesn’t mention the dining, entertainment, children’s and fitness experiences she’s told media she’d like to include in her department stores.

It’s unclear whether the leases allow for uses other than a Bay-like department store.

A court faced with a request to reassign leases will weigh this context and think about whether “the landlord’s world is being turned upside down by having this new tenant,” said Geoffrey Dabbs, a B.C.-based founding partner at Gehlen Dabbs Cash.

“The more it’s a minor inconvenience for the landlord, the more likely the judge will order it,” he said.

While the Bay hasn’t said whether it will seek an assignment, it’s likely because any company in creditor protection has a duty to show the court it’s doing its best to pay back companies and people it owes money to, Dabbs said. The Bay has a 26-page list of creditors, with some lenders owed more than $100 million each.

Liquidation sales and a deal to sell the Bay trademarks to Canadian Tire for $30 million have put a dent in what’s owed but selling leases to Liu would also help.

Anyone who made an offer for leases had to make a deposit of 10 per cent of their estimated purchase price. Court documents show Liu made a deposit of $9.4 million, in addition to $6 million for the three approved leases, which would equate to a purchase price of $100 million for 28 leases.

When a deal like this is reached, Dabbs said a company typically seeks landlord consent because commercial leases tend to have provisions stopping anyone from transferring a lease without a property owner agreeing.

It’s not uncommon for landlords to object because any leases that can’t be sold and aren’t assigned get turned back over to property owners who can choose how to fill them and under what terms.

“Remember, these are anchor leases, so they’re probably very favourable to the Bay or to the tenant in a lot of respects,” said Tolensky, alluding to the fact that anchor tenants are often given attractive rents or terms.

Thus, it’s more advantageous for landlords to get their properties back, said Monica Beffa, founder of an Oakville, Ont., law firm. If they do, they can then charge higher rents, develop them for entirely new uses such as residential units or break them up into smaller parcels that can be rented by a wide array of tenants.

If they don’t and a court assigns the leases to Liu, landlords will likely be watching her closely to ensure she doesn’t violate any terms of the agreement.

“The landlord may be cranky, if the tenant breaches, but put it this way, they don’t want to rely on that,” Dabbs said.

“If they don’t want this lease being assigned, they will fight it right up front.”

This report by Tara Deschamps of The Canadian Press was first published June 28, 2025.