News Summary
A significant dispute has arisen between RioCan Real Estate Investment Trust and Oxford Properties over the lease of a former Hudson’s Bay store at Yorkdale Shopping Centre. RioCan demands a buyout of at least $75 million, while considering leasing the space to Les Ailes de la Mode if Oxford refuses. This situation highlights broader challenges faced by landlords following the bankruptcy of Hudson’s Bay, and the need for extensive repairs at the location adds to the financial stakes involved.
Toronto – A significant dispute has erupted between RioCan Real Estate Investment Trust and Oxford Properties Group regarding the lease of a former Hudson’s Bay store at the prestigious Yorkdale Shopping Centre. RioCan is demanding a buyout of at least $75 million for its lease on the shuttered outlet, which has been at the center of the controversy following Hudson’s Bay’s recent bankruptcy proceedings.
If Oxford Properties refuses the buyout, RioCan plans to lease the space to Les Ailes de la Mode for approximately $1 million per year. The owner of Les Ailes, Isaac Benitah, is part of the Fairweather retail group, which has plans to open a new location at the Yorkdale site no later than May of the following year. This arrangement will provide Les Ailes a portion of the payment from Oxford if RioCan successfully exits the lease.
Located in one of Toronto’s most upscale shopping destinations, Yorkdale Shopping Centre is already home to high-end tenants such as Holt Renfrew, Prada, and Tiffany & Co. Efforts to fill the anchor store spaces vacated by Hudson’s Bay are proving challenging for landlords across Canada, especially in light of Hudson’s Bay’s bankruptcy, which left many locations without reliable operators.
The financial implications for RioCan are significant, as they hold a $75 million mortgage with the Royal Bank of Canada linked to the lease of the former Hudson’s Bay store, alongside incurring about $3.5 million annually in interest. Prior to its bankruptcy, Hudson’s Bay had been paying $2.8 million annually in rent for the Yorkdale space, and the lease, originally begun in 2002, can theoretically extend until 2142 with multiple five-year renewal options.
Following Hudson’s Bay’s bankruptcy, the lease was inherited by RioCan through a joint venture with the retailer in 2015, which RioCan recently wrote down by $209 million due to the business’s receivership. Notably, no bids for the Yorkdale lease were received during a solicitation process under Hudson’s Bay’s creditor protection.
Upcoming Challenges and Repairs
The former Hudson’s Bay location requires extensive repairs, including an estimated $9.3 million for immediate updates and a total of $16.9 million in investments over the next three years, covering critical maintenance such as a new roof, modernization of the elevator system, and replacement of outdated escalators and heating systems. These repairs come as RioCan seeks a resolution with Oxford Properties and plans to pivot to leasing the space to Les Ailes de la Mode.
In light of the circumstances, Benitah’s Fairweather Group is making strides in the retail landscape, having recently signed an agreement to acquire the intellectual property of the Zellers discount retail brand, further indicating plans for growth in the Canadian retail sector.
Oxford Properties has yet to issue a statement concerning the ongoing dispute, but the situation underscores a more extensive pattern of lease controversies surrounding Hudson’s Bay, as landlords continue to grapple with the financial ramifications stemming from rentals vacated due to the company’s liquidation and restructuring efforts. The outcome of this dispute will be pivotal for both RioCan and Oxford Properties, shaping the future of one of Toronto’s premier shopping locations.
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HERE Resources
Additional Resources
- The Globe and Mail: Oxford Properties and RioCan Dispute
- Wikipedia: Hudson’s Bay Company
- Storeys: Hudson’s Bay Liquidation Plan
- Encyclopedia Britannica: Bankruptcy
- Daily Hive: Saved Hudson’s Bay Store Locations
- Google Search: Hudson’s Bay Store Closures
- BlogTO: Hudson’s Bay Warehouse Sale Liquidation
- Google News: Hudson’s Bay Liquidation
- The Globe and Mail: Hudson’s Bay Liquidation Approval
- Google Scholar: Hudson’s Bay Financial Implications
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