New tenants could be coming to two shuttered Ontario Hudson's Bay locations

There is now some greater clarity on the future of a small number of soon-to-be-closed Hudson's Bay Company (HBC) department store locations.

Primaris Real Estate Investment Trust announced today it will officially take back five HBC locations after receiving notice that no new tenants stepped forward to take over the leases.

These stores owned by Primaris — part of a broader bankruptcy protection process for HBC — have now been disclaimed by the court-appointed monitor, clearing the way for the Toronto-based company to reimagine and redevelop the large spaces.

The change affects a total of 532,000 sq. ft. of space, but Primaris sees this as a long-term win after some short-term pain.

"Regaining control of five of our valuable anchor locations allows Primaris to commence repurposing a significant amount of low productivity space, and marks the beginning of our value surfacing exercise," said Alex Avery, CEO of Primaris, in a statement.

"While HBC has been the focus of a lot of discussion and attention, the real story is just beginning, as the disclaiming of leases has finally removed obstructionist barriers enabling us to enhance our properties."

The five locations being eyed for landlord improvements include the HBC stores at Cataraqui Town Centre in Kingston (Ontario), Place d'Orleans Shopping Centre in Orleans (Ontario), Les Galeries de la Capitale in Quebec City, Medicine Hat Mall in Medicine Hat (Alberta), and Sunridge Mall in Calgary.

With the lease terminations finalized, Primaris is moving ahead with long-planned upgrades.

Some of the empty spaces will be leased to new large retailers, others will be carved into smaller stores, and in some cases, the buildings may be torn down entirely to make room for new development — such as restaurants, residential apartments, hotels, and/or the future expansion of the shopping centres.

"There is strong tenant demand for our HBC boxes," said Patrick Sullivan, president and COO of Primaris. "There are opportunities where tenants are considering the entire box, others will be subdivided, and others are likely to be demolished to accommodate development of new outparcel and higher density opportunities."

The repurposing and/or redevelopment of the five locations is expected to cost between $50 million and $60 million, and shrink the total floor area slightly to a combined size of about 475,000 sq. ft. These refreshed spaces are expected to generate more income — about $4 million to $5 million annually — with the first new tenants moving in by mid-2026 and rental income beginning in 2027.

Primaris will also gain new flexibility across these mall sites. The old HBC leases came with major restrictions, including required vehicle parking for nearly 1,900 vehicles and "no-build" zones covering 71 acres of land — preventing new buildings from being added nearby. With those restrictions now lifted, Primaris can unlock new real estate potential.

Primaris expects that the benefits of these changes will go beyond just replacing an empty anchor store. Upgrades can lead to better overall mall performance, helping attract new tenants, boost nearby store sales, and even increase property values.

The company points to its ongoing redevelopment of a former Sears store at Devonshire Mall in Windsor, Ontario, as a successful example of this strategy — where a low-performing anchor tenant was replaced by a mix of stronger retailers.

Four Hudson's Bay properties owned by Primaris subject to bids

While five leases have now been fully disclaimed, Primaris still has four other HBC-occupied sites in its portfolio that are currently subject to bids from potential replacement tenants through the retailer's Companies' Creditors Arrangement Act (CCAA) process.

The four HBC leases that could be sub-leased entail Conestoga Mall in Waterloo and Oshawa Centre (Ontario), Southgate Centre in Edmonton, and Orchard Park Shopping Centre in Kelowna.

The company says those leases come with challenges for new tenants — including old stores needing significant repairs, given that the retailer is known to have practiced a great degree of deferred maintenance for years at many locations.

For these reasons, Primaris believes it will have influence over the outcome. Further details are expected later this year.

Some mall tenants have lease clauses that allow them to request rent discounts if a major anchor store like HBC leaves. But only 27 such clauses are tied to HBC across Primaris' portfolio of over 2,800 leases. Of those, 13 relate to the now-disclaimed sites, and 14 to the four still up for bidding.

As retail continues to shift across Canada, Primaris is betting that the loss of an old legacy tenant like Hudson's Bay will actually bring new life to mall and help position its properties for the future.

Earlier this month, court filings revealed that 17 bids had been submitted for Hudson's Bay's assets, with 12 parties submitting qualified bids covering a combined total of 29 individual leases. Several locations received multiple bids, reflecting overlapping interest, while a significant portion of the company's holdings — 62 locations — did not receive any qualified bids.

Last week, B.C. billionaire Ruby Liu (Weihong Liu) announced that her company, Central Walk Canada Group, has entered into a definitive agreement to acquire 28 HBC store leases across B.C., Alberta, and Ontario. She intends to create a new modern department store chain at these locations.

It should be strongly emphasized that the completion of Liu's transaction is still subject to applicable landlord consents and/or court approval, as well as other terms and conditions contained in the agreement. Liu also owns Tsawwassen Mills, Woodgrove Centre, and Mayfair Shopping Centre.

After 355 years, the end of Hudson's Bay is now just weeks away, with liquidation sales and permanent store closures expected by around June 1, 2025, followed by the retailer fully vacating the properties several weeks later. The full disposal of the retailer's assets is expected to conclude in July 2025.