The battle over prime retail real estate is heating up across Canada as several major landlords push back against a proposed deal that would see B.C.-based mall operator QuadReal Property Group acquire 25 of Hudson’s Bay Company’s remaining lease agreements.
Court documents filed last week reveal that landlords including Oxford Properties, Cadillac Fairview, and Ivanhoé Cambridge have formally objected to the transaction, which values the portfolio at approximately $645 million. The deal would effectively transfer control of these strategic locations from the struggling department store chain to QuadReal, which has been aggressively expanding its retail holdings since 2019.
“This isn’t just about property transfers – it’s about the future of Canadian retail space and who gets to control the transformation of our shopping centers,” says Diane Brisebois, president of the Retail Council of Canada. “These are anchor tenant locations that drive significant foot traffic.”
The lease arrangements in question span major urban markets including Toronto, Vancouver, Montreal, and Calgary, encompassing roughly 4.8 million square feet of retail space. Many of these leases contain favorable terms negotiated decades ago when department stores held considerably more leverage in the retail ecosystem.
According to court filings, Hudson’s Bay is arguing that the lease transfers are permissible under their existing agreements, while landlords contend that the proposed transaction violates specific clauses requiring landlord approval for any substantive change in lease control.
“Department stores traditionally secured extremely favorable lease terms that would be unheard of in today’s market,” explains commercial real estate analyst Mark Williams with RBC Capital Markets. “Some of these leases have renewal options extending decades with below-market rates, which makes them incredibly valuable assets despite Hudson’s Bay’s operational challenges.”
The timing of this dispute coincides with Hudson’s Bay’s ongoing restructuring efforts. The iconic retailer has closed numerous locations in recent years as it attempts to rightsize its operations amid shifting consumer preferences and the accelerated growth of e-commerce.
Financial disclosure documents indicate that the company’s in-store sales have declined by approximately 23% since 2019, while its debt obligations have remained substantial. The proposed lease sale would provide much-needed capital to strengthen its balance sheet while allowing it to focus on its more profitable locations and digital transformation.
For its part, QuadReal has remained relatively quiet about its specific plans for the properties should the transaction proceed. Industry experts speculate that the firm likely intends to redevelop portions of these properties into mixed-use spaces combining retail, office, and residential components – a strategy that has proven successful in revitalizing aging mall properties across North America.
“The traditional department store model is becoming increasingly obsolete,” notes retail strategist Jennifer Campbell. “What we’re seeing is a fundamental reimagining of these spaces. The question isn’t whether these properties will be transformed, but rather who will control that transformation and capture the associated value.”
The landlords’ opposition stems partly from their own redevelopment ambitions. Many mall owners have already begun converting former department store spaces into entertainment venues, food halls, coworking facilities, and other concepts designed to drive foot traffic.
One particularly contentious point involves control over exterior entrances and signage rights, which landlords argue should revert to them rather than transfer to QuadReal. These elements have significant impact on overall mall aesthetics and branding.
“Mall owners are increasingly focused on creating cohesive environments and curating specific tenant mixes,” explains urban planning professor Liam Chen from Ryerson University. “Having a third party control a significant portion of your property complicates those efforts substantially.”
The dispute will likely be settled through a combination of negotiation and court proceedings. Legal experts suggest that outcomes may vary by location, as the specific language in each lease agreement will ultimately determine what rights can be transferred without landlord consent.
For consumers, the battle represents yet another chapter in the ongoing transformation of Canadian retail spaces. The traditional enclosed mall anchored by department stores continues to evolve toward more diverse, experience-focused destinations.
“What we’re witnessing is the latest phase in the evolution of retail real estate,” says property law specialist Sandra Matheson. “These spaces will continue to serve communities, but in ways that look very different from the department store era.”
A hearing date has been set for July 8th in Ontario Superior Court, where both sides will present their initial arguments. Industry observers expect the process could extend for months given the complexity of the various agreements and the significant financial stakes involved.
Meanwhile, Hudson’s Bay continues operating in these locations as the legal process unfolds, though several stores have already begun inventory reduction sales that many interpret as preparation for eventual closure regardless of who controls the leases.
The company’s struggle mirrors broader shifts in retail, where established brands must continuously reinvent themselves to remain relevant. Whether these transformations happen under the Hudson’s Bay banner or through new ownership remains to be seen, but one thing is certain – the retail landscape continues its relentless evolution.
