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Quebec judge orders Hudson’s Bay to pay rent to landlords at shopping malls

Canadian deparment store has not paid rent since March


A Quebec judge has ordered Hudson’s Bay Co. to pay rent at several of its department stores in the province, saying the retailer cannot take the law into its own hands.

In separate rulings issued Friday, Justice Katheryne Desfosses granted safeguard orders to shopping mall landlords Cominar Real Estate Investment Trust, Oxford Properties Group and Dorval Property Corp.

The Quebec Superior Court judge ordered HBC to pay the full outstanding rent at multiple locations starting from when the applications were filed and extending for a six-month period — the maximum time the emergency order can apply — or until a judgement on the merits of each case is rendered.

The decisions were handed down a day before an HBC department store in B.C. was shuttered for non-payment of rent. The retailer was locked out of the Coquitlam Centre, owned by Pensionfund Realty Ltd. and managed by Morguard Investments Ltd., on Saturday.

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Meanwhile, two weeks ago, an Ontario judge blocked a landlord’s attempt to evict HBC from the Hillcrest Mall in Richmond Hill, Ont., after seven months of unpaid rent. But Ontario Superior Court Justice Glenn Hainey also directed HBC to pay half the outstanding rent from April to October.

Company seeking fairness: CEO

Iain Nairn, president and CEO of HBC, said the department store is simply looking for fairness during the pandemic.

“We’re all trying to share the burden here,” he said Monday during a Retail Council of Canada virtual event. “That’s why we’ve kind of taken a stand.”

Nairn added that the company is large enough to “take a stance on behalf of retail” and has had “fair outcomes” with a lot of its landlords.

Daniel O’Donnell, a spokesman for Oxford, said the real estate company welcomed the court’s decision, saying it “reconfirms that a large, privately-owned and purportedly well-funded organization such as HBC should not take the law into its own hands by occupying and trading in leased premises without paying rent.”

He said Oxford is now calling on the retailer and its “New York-based private-equity owners” to honour its obligations and pay rent across Canada.

“HBC’s explicit decision not to pay any rent since March was taken just a few weeks after the company was privatized and restructured so its ultimate parent company is no longer a Canadian company and now located offshore,” O’Donnell said in a statement. “The subsequent eight months of disingenuous negotiations left us with little option than to pursue legal action.”

HBC privatization

HBC was privatized in early March, just weeks before COVID-19 lockdowns.

At the time, Richard Baker, HBC’s governor and executive chairman, said in a statement the change would “fully unleash HBC’s potential at the intersection of real estate and retail.”

In October, HBC announced the launch of HBC Properties and Investments, a dedicated real estate and investments business to manage the company’s portfolio of assets.

Ian Putnam, president and CEO of HBC Properties and Investments, said in a statement the company is continuing to seek a “fair and mutually-beneficial compromise” from its landlords during the pandemic.

“The majority of Canada’s leading landlords have agreed to make reasonable accommodations that serve our mutual long-term interests,” he said.

“Unfortunately, a handful of others are not willing to carry their fair share of the burden, despite their own inability to meet their contractual lease obligations. In these instances, we are happy to have the courts determine what is fair and reasonable.”

The retailer has claimed in court documents that at least one landlord is failing to operate and maintain “first class shopping centres.”

In a statement of claim filed in an Ontario Superior Court, HBC alleged that Oxford is in breach of lease agreements and the contractual duty of good faith.

The retailer claimed that Oxford, which has a portfolio of malls including the Yorkdale Shopping Centre in North York, Ont., and the Square One Shopping Centre in Mississauga, Ont., has refused to deliver suitable premises since reopening after COVID-19 shutdowns.

The claims have not been tested in court.