A group of Hudson’s Bay landlords is accusing a key lender of driving the retailer’s push to sell 25 shuttered department store leases to B.C. billionaire Ruby Liu.

In new court filings, landlords including Cadillac Fairview and Oxford Properties said Pathlight Capital is the only creditor backing the sale, arguing its support is motivated by Liu’s $69.1-million offer.

“All HBC seeks to do here is squeeze out more money for Pathlight,” the landlords said in their joint filing. “This benefit to Pathlight is outweighed by the material and significant prejudice to the
landlords arising from the proposed assignment [of leases to Liu’s company Central Walk.]”

When Hudson’s Bay filed for creditor protection in March, Pathlight was owed more than $95 million—just a fraction of the $1 billion in total claims. Since then, the retailer has closed all stores and begun selling off leases, with YM buying five for about $5 million and Ivanhoe Real Estate taking Metrotown in Burnaby, B.C., for $20,000.

Liu, who owns three B.C. malls and a golf course, had initially sought 28 leases to launch a new namesake department-store in her home province, Alberta and Ontario. The Ontario court overseeing the Bay’s creditor-protection process quickly approved her $6-million purchase of three leases at her B.C. malls, but the remaining 25 proposed lease acquisitions have drawn opposition.

Landlords, including KingSett Capital, Morguard and Primaris, say Liu’s plans for entertainment and dining spaces breach lease terms and argue that she lacks the expertise and realistic budget to build a new chain.

Another lender, ReStore Capital, is set to ask a judge to reject Liu’s deal this week. In a court filing submitted in response, Pathlight called ReStore’s motion “senseless” and “a thinly disguised attempt to recover their indebtedness ahead of others.”

Hudson’s Bay and Liu contend she is capable of launching the venture and prepared to invest more if costs exceed her estimates. They say landlords simply prefer the leases be disclaimed, allowing them to redevelop properties for commercial, residential or mixed-use projects.

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