HBC previously got “sweetheart deals” that allowed it to get low rental rates for certain suburban mall locations.
Shoppers, real estate pundits and retail experts are watching to see what happens to 16 Hudson’s Bay store locations in B.C.
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The parent firm of Hudson’s Bay Company, which operates 96 stores in Canada, including 80 Hudson’s Bay stores, has signalled it plans to sell off some properties and leases as part of a restructuring after filing for creditor protection.
“It would be interesting to know how many years are left on some of those leases,” said Vancouver retail analyst David Ian Gray.
In some cases, there were “sweetheart deals” that allowed HBC to get low rents for certain suburban mall locations, he said.
“If there is still 10 years remaining on any, the company could flip it to someone else,” Gray said. “Of course, if they are due in six months, that wouldn’t be the case.”
The company was granted creditor protection by the Ontario Superior Court of Justice on March 7 so it can continue operating while avoiding bankruptcy. It will go back to court on March 17 when it can apply for an extension and give more details on how it will proceed.
It owes more than $1.1 billion, including $724.4 million in mortgage debt on its flagship properties, such as the downtown Vancouver store at 674 Granville St.
The parent company’s CFO said in an affidavit with the company’s application for creditor protection that it may sell some of its stores and leases.
“It has always been when, not if, this would happen,” said Gray.
The Hudson’s Bay Company co-owns seven stores with RioCan REIT, according to Storeys.com, an online publication that tracks Canadian real estate. The website also reported that of the total $724.4 million mortgage on these seven stores, the largest one, at over $200 million, is tied to the downtown Vancouver store.
Then, in 2022, Streetworks Development, the real estate division of Hudson’s Bay’s parent company, announced plans to redevelop the original flagship building in downtown Vancouver, which dates to 1926, and add a 12-storey glass office tower.
Since then, however, the project has been stalled as demand for downtown office space cratered after the pandemic.
“There would have to be a great deal of due diligence that would be involved” for a sale to happen, said Neil McAllister, senior vice-president, retail, investment sales and leasing at Lee & Associates, a commercial real estate services firm.
Redeveloping the Hudson’s Bay flagship location has always been an expensive prospect, according to Andy Yan, director of Simon Fraser University’s City Program.
“It’s a very central piece of Vancouver real estate and it would involve building around a SkyTrain station,” he said.
Mary Rowe, president and CEO at the Canadian Urban Institute, said “large footprint retail has been changing for years” and there’s an opportunity instead to reimagine what else these major buildings and large spaces could hold. Taking this approach and being open to mixed uses by educational and cultural institutions can change the financing that is available.