An Ontario Court judge has rejected B.C. billionaire Ruby Liu’s bid to acquire 25 more Hudson’s Bay Company leases through the defunct iconic department-store chain’s creditor-protection process.

The Ontario Superior Court decision prevents Liu from proceeding with her quest to launch a chain of department stores under her own name in B.C., Alberta and Ontario, at least temporarily. Justice Peter Osborne largely sided with the landlords, who opposed being forced to accept Liu as a tenant under the Companies’ Creditors Arrangement Act process, instead of the mall owner and senior lenders.

Liu’s proposed $69.1-million payment for the remaining 25 leases would have only covered a fraction of the Bay’s $1.1-billion debt. The court previously approved Liu’s $6-million acquisition of three leases covering three former Bay store spaces at malls that she owns in the Vancouver area; Victoria, B.C.; and Nanaimo, B.C.

The judge said that the case ultimately boiled down to whether the opposing landlords’ interests or those of one secured creditor, ReStore Capital, should be prioritized. He found that Liu lacked the necessary retail experience and that her business plan was “deficient.”

In addition, he called Liu’s proposed chain “admirably ambitious” but “new and untested.” Osborne also noted that her company that would run the chain is a shell with no assets beyond those that she decides to inject.

But the properties’ future remains uncertain. It is not clear whether the leases of the former Bay store spaces will revert to the landlords or have their fate determined via other means through the court. Even if they do gain full control of most, or all, of the leases, the landlords must decide whether to seek higher rents from other tenants or redevelop the spaces for multi-residential housing and other purposes.

For decades, the Bay had paid rents well below today’s market values due to the terms of the long-time leases and restrictive covenants. Many Canadian landlords are redeveloping portions of retail properties into other, more profitable, uses due to the effects of changing market dynamics influenced by the effects of the COVID-19 pandemic and online shopping, and other factors.

“The proposed leadership team includes individuals from affiliated entities who similarly do not have any prior track record in retail operations,” Osborne wrote in the ruling, which came about two months after he reserved his decision. “While proposals have been made to hire certain former HBC executives and managers, those efforts remain incomplete.

“The overall lack of experience at the leadership level represents a significant risk to the operational viability of launching and managing 25 large department stores in the contemplated timeline.”

The landlords—including Cadillac Fairview, Oxford Properties and Ivanhoé Cambridge—had argued that Liu lacked the experience, ability and financial wherewithal to run the large chain that she envisioned and her proposal was “doomed to fail.” Only one landlord did not oppose her bid.

“Every one of the counterparty landlords under those remaining leases opposes the assignment and objects to being forced into a long-term commercial relationship with a tenant to whom they never agreed to lease their properties,” the judge wrote.

The Bay was granted creditor protection in March and shut all stores nationwide in June after failing to secure a buyer.

Court filings showed that Liu planned to invest $400 million in her new retail venture and hire about 1,800 employees. Alvarez & Marsal, the court monitor overseeing the process, had declined to back her bid, citing a lack of sufficient details and contending that expectations of success were unrealistic.

Liu received a rebuke from the court for sending a letter directly to Osborne and urging him to support her proposal.

Osborne also rejected a motion from one of the senior lenders to appoint Alvarez & Marsal as a super-monitor to take over the Bay’s operations, deciding that such a move was “not appropriate.”

Although Osborne sided mainly with the landlords over ReStore, he did award $4 million to the lender as a payment for some of the money that it was owed.

The Hudson’s Bay Company has declined to comment on its next steps.

It remains to be seen whether Liu will attempt to develop her proposed chain via other leased or purchased properties, a proposition that could prove to be much more expensive and lengthy.

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