Ruby Liu, a billionaire trying to purchase 25 former Hudson’s Bay store leases, speaks with media as she arrives at court in Toronto on Friday.Cole Burston/The Globe and Mail
Lawyers for several mall owners fighting a plan to sell 25 former Hudson’s Bay store leases to B.C. billionaire Weihong (Ruby) Liu told a court hearing Friday that her plan is “doomed to fail,” accused her of submitting “unreliable” financial forecasts for the business, and raised questions about her ethics and her ties to the Chinese government.
The insolvent retailer is seeking court approval for the proposed $69.1-million deal to hand over the shuttered locations to Ms. Liu, who has said she wants to launch stores named after herself in British Columbia, Alberta and Ontario.
That plan has met opposition from a number of major landlords – including Cadillac Fairview Corp. Ltd., Oxford Properties and Ivanhoé Cambridge – who have argued that Ms. Liu’s lack of experience as a retailer makes her an unfit tenant. In a court hearing that began on Thursday and continued Friday in Toronto, the landlords urged the Ontario Superior Court to reject the deal.
Faltering under $1.1-billion in debt, and facing a financial crisis, Hudson’s Bay Co. was granted court protection from its creditors on March 7, under the Companies’ Creditors Arrangement Act. Unable to secure the financing or a buyer for the business that could have saved any of its stores, Canada’s oldest retailer closed all of its locations across the country in early June. Thousands of Canadians lost their jobs as a result.
The lease deal was the result of a court-supervised process to sell off the insolvent company’s assets. Ms. Liu, the owner of real estate investment company Central Walk, based in Nanaimo, B.C., was the highest bidder for 28 leases. Three of those stores are located in malls that Central Walk owns, and faced no opposition; following court approval, Ms. Liu paid $6-million to take over those locations. The fate of the rest of the stores is now before the court.
Hudson’s Bay lawyer argues rejecting Ruby Liu lease sale sets unreasonable precedent
The financial forecasts Ms. Liu submitted as part of that court process “overestimates revenue” for the proposed retail chain, and includes estimates of the costs of running the operations that are “drastically understated,” Matthew Gottlieb, a lawyer representing mall owner KingSett Capital, told the court hearing on Friday.
“It’s not putting them to too high a test; it’s putting them to the obligation to show numbers and not just to take them out of a hat,” Mr. Gottlieb said.
Lawyers for various landlords also cast doubt on Ms. Liu’s claim to have $400-million in funds set aside to invest in the new retail business, and argued that her commitment to spend that much would not be enforceable.
Ms. Liu has said that, if necessary, she is prepared to sell one or more of Central Walk’s malls to fund the operations. Lawyers for the landlords said that financial statements show those malls operate at a loss, and that Ms. Liu has provided no evidence that selling those properties would provide the funds needed to supplement her plan – a claim that lawyers for Ms. Liu and for Hudson’s Bay disputed at the hearing.
Sean Zweig, a lawyer representing the court monitor supervising the process, said there is a “reasonable basis” that Ms. Liu can meet the financial obligations of the deal. But he added that without a recognized retail brand, “there is an inherently difficult path to success. The monitor has recommended that the court reject the transaction.
The landlords’ lawyers argued that even if the funds are available, Ms. Liu’s budget for the stores would be insufficient to cover significant investments needed for overdue repairs and renovations; buying inventory to stock the stores and paying for their distribution to locations across the country; hiring hundreds of employees; and other costs.
“Target, Nordstrom, Walmart spent billions. Although $400-million sounds like a lot of money, and it is, it is not a lot of money for a redevelopment and rebuild of 28 stores in three provinces,” Mr. Gottlieb told the court.
Hudson’s Bay lease sale to Ruby Liu is driven by lender’s push to recover cash: landlords
The landlords have a significant stake in the outcome of the lease deal, because Hudson’s Bay acted as an anchor tenant in their malls. At a time when department stores were a major draw of traffic to shopping centres, such retailers were able to negotiate highly advantageous lease terms. Those include paying below-market rent, having the right of approval over any redevelopment a landlord may wish to undertake on the properties and renewals that potentially extend their lease terms decades into the future in some cases.
“These are not your average leases,” Linda Galessiere, a lawyer representing landlords including Ivanhoé Cambridge and Morguard Investments Ltd., said Friday. “They are the largest space in the shopping centres, and they’re the most prestigious space.”
Having an “unsuitable, inappropriate tenant” in those spaces is a far worse outcome than stores sitting empty for the time being, said D.J. Miller, a lawyer for Oxford Properties Group and other landlords. Such a tenant would “degrade the value of that mall” and negatively affect other retail tenants there, she argued.
Ms. Miller objected to arguments made on Thursday by lawyers for Hudson’s Bay, which she said were “demonizing” landlords for asking a question about Ms. Liu’s ties to the Chinese government. Ms. Miller pointed to a translation of an interview Ms. Liu gave in 2023 to YouTube channel 56BelowTV, in which she described her connection to the Chinese People’s Political Consultative Conference, a political body tied to the government. Ms. Miller called this “a bona fide question” about her public statements.
Ms. Liu’s team has been highly vocal in pushing for the approval of her deal, including launching a Change.org petition soliciting public support, and even communicating directly with the judge overseeing the case – a move that led to the office of the chief justice of the Ontario Superior Court admonishing Ms. Liu for “inappropriate” correspondence. Those e-mails praised the judge’s “nobility” and accused other lawyers in the case of corruption.
Ms. Galessiere also took issue on Friday with comments Ms. Liu has made in the past, claiming the landlords are unsupportive of the deal because of her ethnicity. That is inaccurate, Ms. Galessiere said: “It is because of her ethics.”
Maria Konyukhova, a lawyer representing the retailer, pushed back on the landlords’ submissions, saying they were “cherry picking” evidence to claim her business model is faulty.
“Ms. Liu has an ambitious plan to be sure,” said her lawyer, Graham Phoenix. Rejecting the deal would be a “sad” outcome for the Canadian retail industry, he added. “And there’s no one else at the table.”