Alex Bishop

Hudson’s Bay has stopped paying its rent at malls across the country. Is it in trouble?

Is Hudson’s Bay in trouble? There are certainly signs that it could be.

The 350-year-old retailer, whose parent company was taken private on March 3, just a week before COVID-19 hit Canada with its full force, has been hit hard by the pandemic lockdown, as have many retailers.

But unlike most other retailers, the Hudson’s Bay Company (HBC) seems to have adopted a policy of stiffing its landlords in malls and plazas across the country.

In fact, in the eight months since the pandemic shutdown, HBC hasn’t paid any rent at all to eight landlords in Ontario, Quebec, British Columbia and Florida, according to legal filings. HBC has leases valued at $20 million a month across 21 locations in North America.

Industry onlookers see this as a sign the company may be in financial distress, spurred by the extraordinary struggles the pandemic has imposed on retailers of non-essential items, which depend on customers visiting their bricks-and-mortar stores.

“Anytime a big company is not paying rent it’s not really a positive sign because they put themselves at risk of losses and potentially some severe legal issues that entail significant financial expenses,” said David Soberman, a professor of marketing at Rotman School of Management at the University of Toronto. “Companies try very hard to avoid that situation.”

HBC says the issue of unpaid rent is not an indication of any financial distress. In a statement to the Star, Ian Putnam, president and CEO of HBC Properties and Investments, said the company has “more than ample liquidity to continue to fund our business,” and that it has “taken prudent steps to manage our expenses and have been working with vendors and landlords on reasonable accommodations for this unusual and challenging time.”

HBC also received assistance from the federal wage subsidy program, which, according to a company source who was not authorized to speak publicly, helped the company “retain associates and partially mitigate the significant reduction in traffic to malls and downtown locations and the subsequent loss in revenue.” The company also has a “stable” line of credit for liquidity, the source said.

HBC’s tense relationship with its landlords, however, presents a much starker image of
its financial status: it shows a large retailer that is not meeting its most basic expense.
Quebec landlord Cominar Real Estate has filed three eviction notices against the
Hudson’s Bay Company (HBC) for failing to pay millions of dollars in rent since April in
three mall locations. Similar legal notices have been filed against HBC by 713949
Ontario Limited, owner of St Laurent Shopping Centre in Ottawa; 585562 B.C. LTD,

owner of Sevenoaks Shopping Centre in Abbotsford, B.C.; Revenue Properties Company
Limited, owner of Centrepoint Mall in Toronto; Morguard Corporation, owner of
Bramalea City Centre in Brampton, as well as four other locations in Ottawa and
Toronto, and SmartCentres REIT, which is seeking a total of $1.4-million in unpaid at
HBC-owned Home Outfitters locations in St. Catharine’s and Oshawa.
Oxford Properties is also suing HBC for more than $2.29 million in unpaid rent at two
shopping centres including Galeries de la Capitale in Quebec City and Promenades
Gatineau near Ottawa. In these two malls, HBC’s sales dropped more than 99 per cent in
April, according to court filings. HBC has reportedly not paid rent in eight of the 11
Oxford-owned malls in Canada where it has stores since April 1.
Oxford filed an eviction notice last month to HBC at Hillcrest Mall in Richmond Hill
after seven months of unpaid rent — a move that was temporarily halted on Oct. 20 by
an Ontario judge, who ordered HBC to pay half the rent ($659,395) it owed. HBC
The court ruling has been welcomed by both HBC and Oxford but for different reasons.
Putnam said he is “grateful” that the court has “recognized the extraordinary challenges
of the global pandemic and how the burden can be shared fairly and lawfully, especially
as it relates to non-essential retailers.”
Oxford spokesman Daniel O’Donnell said the ruling “demonstrates that HBC cannot use
leased premises and not pay any rent.”
Rotman’s Soberman believes these legal disputes could damage HBC’s reputation. “It
does not increase the likelihood of a consumer deciding to go shopping at the Bay and it
certainly does not increase the likelihood of a supplier to ship product to the Bay,” he
Alex Bishop, managing partner of Recast Properties, a mixed-used real estate
development firm, agrees these legal disputes don’t instill any confidence in HBC’s
financial health.
Bishop believes HBC is no longer the company it once was. Today, it’s a company held
by American private equity investors and hedge funds, with no Canadian board
members and whose parent company is based in Bermuda, he said.
In his analysis of the department store’s public financial disclosures, Bishop found HBC
has had negative cash flow since the beginning of 2018 and has been underperforming,
even in its peak holiday seasons.
“If HBC was still available as a stock, I would not buy it. All signs point to them burning
much more cash to survive this. At their current burn rate, they’d be out of money this
quarter,” according to his calculations, he said. Because HBC is now private, the amount
of cash it has on hand is not known.

Bishop predicates this on several factors: the company’s restructuring, its unpaid rent
lawsuits, its use of government loans, plus the fact that HBC has not opened its books
for its landlords.
In court filings, Oxford said it asked HBC to provide financial information so it could
negotiate rent relief.

Oxford spokesman Daniel O’Donnell said the company has worked “constructively with
hundreds of other retailers across Canada, including HBC’s peers, to partner on rent
relief packages and restructure leases.” These retailers “have worked towards meeting
their obligations while HBC elects to wash its hands of them entirely,” he said. But
“eight months of disingenuous negotiations has left us with little option than to pursue
legal action,” he added.
The fact that Putnam claims the company has “more than ample liquidity” makes the
company’s decision not to pay rent “more egregious.” O’Donnell said.
In its court filings HBC is claiming it’s not paying rent because Oxford breached its
contract by not providing “an environment that attracts substantial numbers of
customers … to stay at the centre for an extended period of time.”
On Nov. 13, HBC filed a countersuit against Cherry Lane Mall in Penticton, B.C.,
alleging similar reasons: “The landlords have continued with its traditional marketing
efforts as if nothing happened. This lack of marketing has contributed to the sustained
lack of footfall since the reopening of the malls,” the retailer claimed in the suit.
LOADING…Retail is on the front lines of the economic fallout of COVID-19, said Benjamin
Shinewald, CEO of BOMA Canada, a real estate industry association. The impact has
been felt by both landlords and tenants, who have what Shinewald calls “a symbiotic
relationship” in helping one another be successful.
“Landlord-tenant relationships are partnerships. I think that means in general if you’re
claiming hardship you have to substantiate that,” Shinewald says.
Diane Brisebois, president and CEO of the Retail Council of Canada, agrees that retail
stores and their landlords depend on each other in good times and bad. For both, the
lockdowns have “put pressure right across their operations.”
Department stores, specifically, are struggling globally, seeing customers and investors
leave. In pre-pandemic times, customers could leisurely enter a department store, try on
clothes and cosmetics and buy non-essential and luxury items. Now, the makeup
counters are covered in plastic and dressing rooms are quiet as retail stores experience
“the biggest drop in customer traffic we’ve ever seen,” Brisebois said.
“One of the Achilles’ heels of the HBC format is that there’s no grocery component, so
people don’t need to go in,” Soberman says. “I think the shopping centres are between a
rock and a hard place.”

With the holiday season now ramping up, Brisebois worries further restrictions will be
“the final nail in the coffin” of many retailers.
HBC is trying to beat this trying time for retail by investing in e-commerce and has seen
“very strong growth online,” said a company spokesperson. Its website has seen a 46 per
cent bump and a 43 per cent growth in sales year-over-year and HBC is continuing to
build on this, the spokesperson said.
HBC launched a new website in April that included a customer service live chat and a
curbside pickup option. It has also relaunched its rewards loyalty program to integrate
with the new website. In July, HBC introduced a digital flyer and the company has
added around 35 new brands to its collection, eight of which are exclusive to HBC in
But industry experts have also noted that HBC has decided to open later and close
earlier since the onset of the pandemic and still hasn’t introduced contactless payment.
The general lack of innovation and the slow shift to online suggests that HBC is trailing
far behind, said Kyle Lanzinger, vice-president of Concierge Capital Partners. “HBC isn’t
at a level to offset their gigantic per square footage costs of retail,” he said. “It’s the sad
story of every department store … It’s what we learned only three years ago when Sears
filed for bankruptcy.”
Nonetheless, experts believe the uncertainty instilled by COVID-19 and the fact that
HBC is now a private company leave significant unknowns about the health of the
HBC’s Putnam broadly refuted allegations the company is in trouble, stating “the courts
will continue to provide a common-sense approach that is fair to landlords and
retailers” that will help the company beat the impacts of the pandemic.
But Toronto lawyer Dennis Tobin, who specializes in commercial and retail leasing, is
more hesitant, noting there are a lot of factors for the courts to consider.
“I think the challenge for the judge is going to be what was possible for the parties to
address, and whether that impacts the payment of rent,” Tobin said. For example, a
judge will have to assess whether nor not a lease covers foot traffic as a responsibility of
a landlord, whether or not that was neglected and whether or not that justifies
nonpayment of rent.
Most experts agree that if the pandemic lasts all of next year, the impact on HBC will be
“I don’t think we’re at the point of writing a eulogy for HBC, but plenty of retail
operations that were profitable have not just tripped up but have been decimated by the
pandemic,” Soberman said. “Hudson’s Bay could’ve transformed itself into a different
animal that was very successful, but with the pandemic, whatever their plan was, it’s like
they’ve hit an incendiary device that blew up their path, perhaps injuring them too.”

“If the pandemic lasts all of next year, it’s going to be really hard on HBC,” Soberman
said. “This isn’t rocket science. Not paying rent at all means trouble.”

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