HBC files suit against Oxford, says landlord breached lease agreements

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Hudson’s Bay is firing another salvo in a battle with some of its landlords over rent payments during the global coronavirus pandemic.

On Tuesday, Hudson’s Bay Co. ULC filed a lawsuit against Oxford Properties and its affiliates, claiming Oxford is in breach of its lease agreements at seven shopping malls it owns, co-owns or manages. HBC says in its statement of claim that it is not required to pay rent on those stores until the “breaches” are resolved.

The department store retailer is asking to be reimbursed for rent it has paid to Oxford at three of the malls since April; HBC has withheld rent at the four other locations. HBC is also seeking millions of dollars in damages for lost store sales.

The lawsuit follows recent legal proceedings against Hudson’s Bay for unpaid rent, filed by landlords including Oxford, and others in Quebec, British Columbia and Florida.

Nearly eight months after the World Health Organization declared COVID-19 a pandemic, growing case numbers have led to restrictions that have hurt many retailers and landlords.

The suit filed in Ontario Superior Court on Tuesday contains claims similar to those HBC made in responses to the landlords' legal actions – including that Oxford violated its lease obligations to operate “first-class” malls with high customer traffic.

HBC’s lawsuit relates to Yorkdale Shopping Centre and Scarborough Town Centre in Toronto, Square One Shopping Centre in Mississauga, Newmarket’s Upper Canada Mall and Hillcrest Mall in Richmond Hill in Ontario, and Alberta’s Southcentre Mall in Calgary and Kingsway Garden Mall in Edmonton. Also named in the suit is Oxford’s parent company, the Ontario Municipal Employees Retirement System (OMERS), and some of their mall partners, including the Canada Pension Plan Investment Board (CPPIB) and Montez Hillcrest Inc.

North America’s oldest retailer says Oxford failed to make upgrades at those malls or launch marketing initiatives to reassure shoppers it was safe to return.

“HBC has been deprived of the benefits of the leases and suffered a significant drop in sales,” the claim states.

HBC says the malls' ventilation systems and air filters should be improved, and that the landlord should add features such as automatic doors. It also claimed more staff is needed to monitor physical-distancing and mask use.

Store vacancies in the malls have increased during the pandemic, further reducing the number of shoppers, HBC says in its claim.

Customer traffic and HBC’s sales have fallen by as much as 70 per cent since reopening, the retailer said.

In a statement, Oxford spokesperson Daniel O’Donnell said the company has been unable to have “constructive dialogue” with HBC on the matter, and called the claims about the shopping centres a “disingenuous attempt to retroactively justify its decision to stop paying rent.”

“Oxford has been able to work constructively with hundreds of other retailers across Canada, including HBC’s peers, to partner on rent relief packages and restructure leases,” Mr. O’Donnell wrote. “These complaints are clearly without merit and we are confident we will prevail.”

Since April, the retailer has paid its full rent at Yorkdale, Scarborough and Square One “under protest,” the claim states.

In Quebec, Oxford Properties and Cominar REIT have recently taken HBC to court over unpaid rent amounting to $2.28-million and $1.4-million, respectively. Landlords in Vancouver, the Montreal area and in Florida have also initiated legal proceedings seeking unpaid rent on Hudson’s Bay stores, as well as the company’s luxury chain, Saks Fifth Avenue, and discount Saks Fifth Avenue Off Fifth.

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