Department store blocked from taking over vacant Hudson's Bay space in Toronto mall

An Ontario Superior Court judge has blocked a proposal that would've seen the department store, Les Ailes de la Mode, owned by Fairweather Ltd., take over the massive retail space left vacant by Hudson's Bay last year in Yorkdale Shopping Centre.

Oxford Properties, which manages Yorkdale, contended in court with FTI Consulting, the receiver for Hudson's Bay's former lease.

Last month, a lawyer representing the global real estate developer and manager positioned Yorkdale as a "leading luxury retail destination," arguing that Fairweather's stores "look and feel temporary and downmarket."

Representatives for Fairweather maintained that the department store had been present at Yorkdale from the mall's early days in 1964, and most recently until 2020, when its lease expired.

In a ruling on Monday, Judge Jessica Kimmel officially blocked the department store from taking over the 300,000-square-foot vacant space.

"There is an apparent lack of commercial soundness to this arrangement that, at the very least, makes it difficult for the court to afford deference," Judge Kimmel wrote.

In a November affidavit, Oxford Properties stressed the importance of upholding the luxury mall's legacy, arguing that the department store would impact the shopping centre's appeal to high-end tenants.

"I cannot overemphasize how inappropriate and detrimental it would be to have Fairweather occupy the most prominent premises at Yorkdale for even one year, much less the next 50 years as contemplated by the proposed Fairweather transaction," Nadia Corrado, a vice president with Oxford Properties, argued.

"This would have the effect of compromising decades of significant investment and planning by Oxford and create a cascading negative effect for Yorkdale's existing tenants."

Prior to the ruling, Judge Kimmel asked Oxford Properties whether it would revisit its refusal to allow Fairweather into the space, noting that doing so could allow the landlord to resume rent collection following Hudson's Bay's creditor protection filing and departure.

However, Oxford's lawyer wrote last month that "having an anchor tenant space vacant with no rent being paid is far better for the shopping centre and its tenants than an unsuitable anchor tenant."

Oxford also argued that the department store lacks experience operating a "single integrated traditional retail department store," and had not shared key information regarding its proposed floor plans, design drawings, and business plans.

"Oxford is being asked to consent to a new sublease that does not mirror the tenant's obligations under either the HBC Sublease or the Head Lease, and includes a non-contractual commitment from RioCan as secured creditor to cover the difference in rent," Justice Kimmel wrote.

"At the very least, it was unfair to withhold the Ailes Requested Information (among other things) and not to properly take into account Oxford's interest in understanding how any prospective new subtenant was planning to open and operate a department store of the size and importance of the former HBC Yorkdale premises," she concluded.