Primaris has regained full control of all former Hudson’s Bay Company anchor spaces across its national enclosed shopping centre portfolio, opening the door to major leasing and redevelopment activity, the REIT announced Wednesday.

The REIT now controls 1.3 million square feet of former HBC gross leasable area and 500,000 sf of former Sears space, and has accelerated negotiations with retailers. Its strategy includes long-term leases for single and multi-tenant configurations, as well as redevelopment and subdivision to accommodate multiple large-format users and high-value commercial retail units (CRUs). While design and permitting work proceeds, Primaris is signing short-term leases with reputable tenants to restore rental income, the REIT said.

“The departure of Canada’s final department store is an enormous opportunity for Primaris, providing maximum flexibility for revitalization through reinvestment and remerchandising, as well as substantial land sales,” said Patrick Sullivan, the REIT’s president and chief operating officer. “There are many international and national tenants struggling to find expansion space in Canada. Primaris is in advanced discussions with a number of credit worthy retailers, and we expect to enter into agreements in the coming months.”

To date, 516,000 sf of former HBC space has been leased to single-tenant users with minimal Primaris capital. Walmart remains the previously announced 139,000-sf in the former former Sears location at Lime Ridge Mall in Hamilton. The REIT plans to demolish 303,000 sf of former Sears GLA at Les Galeries de la Capitale in Quebec City and Oshawa Centre in Oshawa, Ont., to enable new retail outparcels and potential mixed-use land sales. Strong inbound tenant interest has increased since HBC’s final leases were disclaimed, said the REIT.

Primaris said it expects to spend $125 million to $150 million repositioning all 11 former HBC spaces over the next three years, generating projected yields of 7% to 12% where capital is invested. Repositioning and demolition costs for former Sears spaces are pegged at $20 million to $30 million. The REIT has also regained 70.8 acres of land previously restricted under no-build and parking-ratio covenants—lands it estimates could be worth $150 million to more than $250 million once value-surfacing events occur. Master-planning is underway for 6,300 residential units across several properties. Primaris says its 2025 and 2026 guidance remains unchanged.

“We have regained control of space that has gone many years without investment, giving us the opportunity to revitalize and dramatically improve the productivity of some of the best located, but recently least productive space in our portfolio,” added Alex Avery, the REIT’s CEO. “Perhaps even more impactful is the 70.8 acres of land no longer subject to no-builds, as well as adjacent lands now more suitable for development.”

Although the REIT owned the lands, they were “sterilized” from productive use for several decades into the future, and the parcels’ costs now exceed the value of re-leasing and redevelopment plans.

“HBC’s departure will deliver a significant increase in income for Primaris that more than fully pays for itself,” said Avery.

Primaris notes that while past department-store closures such as Target and Sears created leasing challenges, today’s market is markedly different: Retail development has been minimal for a decade, population growth is strong, and restrictive site covenants have finally been lifted. The REIT says Canadian malls have evolved beyond reliance on traditional department store anchors, with CRU tenants now driving sales.

By the end of 2024, HBC had fallen to Primaris’ 11th-largest tenant, contributing just 1.4% of minimum rent. Its top five tenants—Canadian Tire, Walmart, Loblaws, TJX and Bell Canada—collectively accounted for 16.5% of minimum rent. Primaris expects new tenants replacing former HBC locations to further strengthen and diversify its tenant mix.

Primaris secured full control of the HBC leases after they were disclaimed in iconic now-defunct retaile’s ongoing Companies’ Creditors Arrangement Act (CCAA) proceedings.

Pictured: Lime Ridge mall in Hamilton

Photo: Cadillac Fairview (former owner of Lime Ridge)