Hudson’s Bay Co. is facing more legal actions from its landlords, with shopping centre owners in Quebec, B.C. and Florida taking Canada’s oldest retailer to court for not paying rent during the novel coronavirus pandemic.
Landlords for Park Royal North mall in West Vancouver, Les Jardins Dorval in the suburbs of Montreal island and Bal Harbour Shops in Florida’s Miami-Dade County have initiated legal proceedings in a bid to force HBC to pay the unpaid rent on its eponymous department store locations, its luxury chain Saks Fifth Avenue and discount Saks Fifth Avenue Off Fifth.
The legal proceedings are occurring as pandemic measures stretch into their eighth month and COVID-19 cases soar in Ontario and Quebec. Indoor activity is restricted and the economic slowdown is hurting retailers and their landlords.
At the West Vancouver mall, Park Royal Shopping Centre Holdings Ltd. said, HBC has not paid its monthly rent of $61,050 since April and owed about $350,000 as of early August, according to a civil claim filed with Supreme Court of British Columbia.
At Les Jardins Dorval, landlord Dorval Property Corp., is asking the court to order HBC to pay $657,348 in unpaid rent, according to its filing with the Quebec Superior Court.
The property owner of Bal Harbour Shops said Saks Fifth Avenue LLC owed $1.88-milllion in unpaid rent, according to a filing in the Florida state court system.
These are in addition to legal action from two other HBC landlords in Quebec, Oxford Properties and Cominar REIT, which are seeking unpaid rent in the amounts of $2.28-million and $1.4-million, respectively, according to court filings.
The five property owners said HBC has breached their leases by not paying. HBC says the landlords in Canada run substandard malls that are not doing enough to attract customers, are hurting the retailer’s sales and rendering its stores unprofitable. In Florida, HBC filed a lawsuit against Bal Harbour, accusing the property owner of divulging Saks' confidential financial information to third parties, along with other grievances.
HBC was unprofitable before the pandemic hit in March and had sold brands and real estate, such as its main Lord & Taylor property in Manhattan. The retailer’s executive chairman took the company private earlier in the year in part to restructure out of the public eye. It had just closed the privatization when the pandemic slammed the economy, devastating department store chains, fashion retailers and enclosed malls.
Retailers of all sizes have struggled to pay the rent since their revenues dropped precipitously. Department store chains Neiman Marcus and JCPenney have filed for creditor protection, along with brands such as J. Crew and Ann Taylor. The owners of enclosed malls are dealing with low rent collection, with some of the biggest in Canada and the United States getting only about 15 per cent of the rent at the worst parts of the crisis.
HBC has paid the rent in some of its locations. Ian Putnam, president and chief executive officer of HBC Properties and Investments, said the company has “more than ample liquidity to fund our business.”
“We’ve taken prudent steps to manage our expenses and have been working with vendors and landlords on reasonable accommodations for this unusual and challenging time,” he said in an e-mailed statement. “Our flagship assets and strong balance sheet provide multiple ways to further enhance our liquidity should we choose to do so.”
HBC is not the only one not paying. Tenants of all sizes from small coffee shops to larger businesses like GoodLife Fitness have withheld rent at times since pandemic restrictions began.
“There are countless tenants that have not paid or paid late or partially paid," said David Bish, head of Torys' corporate restructuring and advisory practice, who is not working for HBC. "This is uncharted territory. People are making up a new playbook in this crisis. It is a concerted move and a strategic move to elect not to pay. It certainly suggests that there is a liquidity issue and that is not a surprise.”
HBC may qualify for Ottawa’s new rent relief help, but it would cover only a small percentage. Meanwhile, big property owners in Canada like Oxford and Ivanhoé Cambridge have given struggling retailers rent deferrals and abatements.
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