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Oxford Properties Corp. and Ivanhoe Cambridge Inc. have come together to make a deal with Target Canada.

Steven Senne/AP

Two of the country's largest landlords have moved quickly to snap up 11 of their best leases from insolvent Target Canada for what it describes as a premium price, underlining their urgency to take back control of their retail space.

Oxford Properties Corp. and Ivanhoe Cambridge Inc. have come together to make a deal with Target Canada as it winds down its operations under bankruptcy protection. The proposed purchase price for the leases, which include the store in Square One Shopping Centre in Mississauga, Ont., is being withheld but is "at the high end of the value range," according to new court documents.

The proposed deal, which Ontario Superior Court will be asked to approve on Thursday, is noteworthy because often would-be buyers don't pay much for assets of a failed company. But the landlords' agreement underlines the pressure on landlords to rapidly gain back control of prime Target stores and replace them with stronger alternative tenants.

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Target Canada was granted court protection from its creditors on Jan. 15, saying it couldn't make a profit for at least another five years. It abruptly announced it was leaving Canada and closing all 133 of its stores, putting them up for auction. The initial bidding for the leases is to close on Thursday.

The landlords' deal comes as industry experts warn that Target Canada may have trouble selling some of its other leases because of their generally less-than-stellar locations. U.S. parent Target Corp. bought those and other leases in 2011 for $1.8-billion from Hudson's Bay Co., which was looking to unload its discount Zellers chain. Wal-Mart Canada Corp. subsequently bought 39 of the former Zellers leases from Target to expand its Wal-Mart chain.

But now that Target is quitting Canada, rivals may not feel as much need to add more stores. Executives at big domestic retailers have already underplayed their interest in picking up Target Canada's leases.

"This network of stores has been out and on the market for many, many years in one way, shape or form, and we haven't invested particularly in any meaningful number of stores," Galen G. Weston, executive chairman of Loblaw Cos. Ltd., told a conference call last week.

"That's because their network is not particularly complementary to the Lobaw network...We have identified a number of stores that we think would be complementary, but don't think of it as anything significant or material."

Michael Medline, chief executive officer of Canadian Tire Corp. Ltd., told analysts it is only interested in a "very limited" number of Target Canada's leases "if they're available and if we like them."

Wal-Mart Canada and Lowe's Canada are among other retailers interested in some Target locations as well, industry insiders say.

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Amid the jockeying, Oxford and Cambridge quietly approached Target Canada in late January about pursuing a potential transaction involving a group of their best leases, court documents say. They're attempting to go on the offensive rather than take the chance of a random retailer moving into their malls, industry observers say.

Oxford and Cambridge will probably have no trouble leasing out the properties they intend to buy back, said Alex Arifuzzaman, founding partner of retail-real estate specialist InterStratics Consultants. They may want to introduce destination upscale retailers to their malls such as U.S. department stores Nordstrom, Saks or Bloomingdale's, he said.

"They want control and speed," Mr. Arifuzzaman said in an interview. As well, they may be able to increase the rent for an alternative tenant, he said.

Both Oxford and Ivanhoe Cambridge have been moving more upmarket in their malls as they grapple with customers shifting to e-commerce and generally declining shopper traffic at bricks-and-mortar shopping centres.

The 11 stores in the latest deal also include those in Upper Canada Mall in Newmarket, Ont., Oakridge Centre in Vancouver, Metropolis at Metrotown in Vancouver, Les Galeries de la Capitale in Quebec City and Mic Mac Mall in Halifax. Oxford and Ivanhoe own some jointly with other partners.

To move swiftly, Oxford and Ivanhoe agreed to drop some customary conditions for these types of transactions, such as a "due diligence" process, court filings say.

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Target store leases being sold back to landlords:

Square One Shopping Centre, Mississauga, Ont. (Oxford/AIMCo)

Upper Canada Mall, Newmarket, Ont (Oxford/Canada Pension Plan Investment Board)

Place Laurier, Quebec City, Que (Ivanhoe Cambridge)

Oakridge Centre, Vancouver (Ivanhoe Cambridge)

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Metropolis at Metrotown, Vancouver (Ivanhoe Cambridge)

Mic Mac Mall, Halifax (Dartmourth), N.S. (Ivanhoe Cambridge)

Les Galeries de la Capitale, Quebec City, Que (Oxford/CPPIB)

Hillcrest Mall, Richmond Hill, Ont (Oxford/Montez)

Kingsway Mall, Edmonton, Alba. (Oxford)

Carrefour de l'Estrie, Sherbrooke, Que (Ivanhoe Cambridge/CPPIB)

Conestoga Mall, Waterloo, Ont (Ivanhoe Cambridge)

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