For the longest time, the name Weihong ‘Ruby’ Liu was virtually unknown to Canadian retailers and consumers.
That perception quickly changed, after the Star first reported that the British Columbia-based billionaire mall owner had been touting on Chinese social media her intentions to seize a “once-in-300-year opportunity” by acquiring 28 Hudson’s Bay stores in its bankruptcy proceedings.
She has already taken over three Hudson’s Bay leases in malls she owns through her commercial real estate company and is back in court Thursday in a final showdown to seek court approval to force the transfer of 25 more leases without the landlords’ consent.
The outlook appears far from favourable.
Landlords of 24 out of 25 leases — including Cadillac Fairview, Ivanhoe Cambridge, Oxford Properties, and Morguard — as well as court-appointed monitor Alvarez and Marsal overseeing the proceedings, are all opposed to the transaction.
They have described her company as “a start-up organization with no existing operations, no brand recognition, and no track record as a retail business.”
Liu remains defiant.
“I believe I will win,” she told the Star on Tuesday, speaking in Mandarin. “I also trust that the judge will rule according to the law, and I have confidence that Canada is a country governed by the rule of law.”
With selfie-stick in hand, the petite self-made entrepreneur born in northeastern China has, over the past four months, chronicled her bid for the Bay stores online, putting her money where her mouth is.
The chairwoman of Central Walk has emerged as the only leading bidder for 25 Hudson’s Bay leases with an offer of $69.1 million.
She intends to launch a chain of department stores under her English name, Ruby Liu, in 15 locations in Ontario, five in Alberta, and five in British Columbia.
The stores would fall under her newly created Ruby Liu Commercial Investment, a company she incorporated for the Hudson’s Bay stores bid.
Liu’s bid for Hudson’s Bay intellectual property was unsuccessful losing out to Canadian Tire.
If approved, the deal would yield the defunct retailer’s senior creditors, Pathlight Capital and Restore, more than $50 million. Restore, however, also opposes Liu’s bid, contending that most of the proceeds favour Pathlight.
In her business plan, Liu pledges to take over the 25 leases on an “as-is, where-is” basis, committing $400 million in equity, including $120 million for store renovations.
She says the stores would employ up to 1,800 people.
Liu also intends to provide a personal guarantee for rent obligations under the leases for one year.
She says her stores would all roll out within six to 12 months of a deal and would provide an “immersive shopping experience.”
The landlords contend that the business plan “is not sufficiently developed or realistic” and “will be insolvent in the near term.”
They cite several reasons, including that it is unprecedented for a start-up to launch a retail operation of this scale in Canada within the proposed timeline, that the potential lease purchaser’s management team lacks relevant retail experience, and that the budget for store renovations is below what is actually required.
“In my assessment, there is a strong probability that (Liu’s company) will run out of money before the first “Ruby Liu” store opens,” Rory MacLeod, executive V-P of Cadillac Fairview, said in a court document. “But even if (she) is capable of operating for a year or two, the impact of a second insolvency so shortly after HBC would cause significant harm.”
In its report, Alvarez and Marsal concluded that Liu’s company would be able to “meet the financial obligations” under the leases, but there are “credible concerns” about her ability to satisfy the non-monetary obligations.
While Liu had previously said she would work with J2 Retail Management to handle supply chain and logistics, the Alvarez and Marsal report noted that during cross-examination last week, Liu testified that the partnership would no longer proceed, raising concerns about her inventory plans.
“I would not have undertaken this process, expended the time and several million dollars to date, committed my considerable wealth going forward, and proceeded despite the landlords’ objections, if I were not fully prepared to fund this venture,” Liu said in a court document responding to the opposition.
In an interview with the Star on Tuesday, Liu brushed off concerns about supply chain issues.
“This does not determine my success or failure, which depends on my execution speed, my team’s negotiation capabilities, and how I design the store experience.”
Liu said she was angry and perplexed by the monitor’s opposition, arguing that Alvarez and Marsal’s role should be to assess the legality of the process, not her business acumen.
Under the Companies’ Creditors Arrangement Act, the monitor’s approval is one factor a judge may consider when deciding whether a lease can be reassigned, but it is not determinative.
Hudson’s Bay, which is backing the Liu bid, said in court documents the monitor applied an overly stringent standard in its assessment, while the landlords oppose the deal because they “derive much greater value if the transaction fails to close and the leases are ultimately” returned to landlords.
The retailer also noted that landlords do not want Liu to assume the leases they signed with Hudson’s Bay years ago that carry below-market rents and include clauses that restrict the landlords’ ability to redevelop a shopping centre without the tenant’s consent.
“I have high hopes that the law will rule fairly; if it does not, I would be deeply disappointed in Canada,” she said.
