An American business executive says Canadian mall owners are well-positioned to acquire key retail tenants in their portfolios in the months ahead to keep them operating rather than face the prospect of closure.
Bradley Snyder, Executive Managing Director of Tiger Capital Group, who is based in Boston, said large Canadian landlords are a very finite group.
“I deal with them day in and day out with things like signage and going out of business sales and we know them well. And they’re also backed on the one hand by Ontario teachers, OMERS and Caisse de dépôt and RioCan public. You’ve got landlords, a finite group, with significant backing behind them notwithstanding that there’s been layoffs with those landlords,” said Snyder.
“They’ve got large resources behind them. And what we’re seeing in the States is Simon Property Group is coming in and acquiring various of their significant tenants and the reason they’re doing that is to protect their co-tenancy provisions. So things like Aeropostale, Brooks Brothers and there was interest in JC Penney. I think Brookfield and Simon were involved in that.
“But even on the Canadian landscape we’ve seen it. Years ago, maybe five years ago, we saw Cadillac come in and they did a DIP (debtor in possession) facility to Laura Shoppes and that was unusual back then. But I just see more interest in that now and the reason Cadillac did it then was that Laura Shoppes wanted to close a good number of stores and the quid pro quo was that we will give you the DIP financing but you will not close any stores in Cadillac properties. You’ll close other stores. There was a reason they did it and there are strategic reasons on the Canadian retail landscape now as all of these landlords are looking at their retail properties and figuring out the best way to basically salvage them. And one of the tactics we’re seeing in the States, and it makes a lot of sense in Canada, is for these landlords to come in and take more aggressive positions vis a vis the retailers.”
Snyder said that if a landlord comes in and protects a significant player they’ve got to look at the leases, at the co-tenancy provisions. Let’s say there are two players in a mall that if they go out of the mall then all the specialty stores have the right to terminate their leases. If that’s the case, landlords want to do what they can to protect those two major players so they don’t leave the mall and trigger the co-tenancy provisions in all the other leases.
“It’s really a defensive play and that’s the major advantage. I’m not suggesting that somebody like RioCan is in the business of running retailers. They’re not. But on the other hand if they can co-invest with a group that consists of an operating company to run the retailer and somebody to buy the intellectual property, and exploit the intellectual property, and they can help salvage by changing the terms of the lease or investing in that retailer, they can help salvage that lease so that others aren’t triggered, that’s a huge advantage for them,” he said.
Snyder said he has been involved in Canada since 1998 and did the final Eaton’s financing and the final Eaton’s liquidation. Over the years, he’s been involved in many retail acquisitions in Canada.
“We know the underlying value of assets and it’s not just retail assets. It’s also industrial . . . With that we do multiple things. We provide all the asset based lenders valuations off of which they lend. We have a liquidation business off of which we write guarantees and we write cheques. Not just retail but also commercial, industrial, oil and gas, etc.,” said Snyder.
“We have a finance business where we generally do the more aggressive last out financing. So an ABL provider may come in and put 50 cents down and we may do eight cents behind them but it provides additional liquidity to the borrowers.
“All these things are inter-related. It’s knowing the value of the assets and we buy and we sell and we finance.”
As more retailers face insolvency and possibly bankruptcy, Snyder said Canadian landlords are going to become more interested and involved in the process.
Snyder recently participated in a retail-focused webinar hosted by Insolvency Insider. It was called “The New Retail Restructuring Playbook“.
During that webinar, Snyder said Canada is going into a stage of uncertainty with many wondering if businesses are going to shut down or stay open.
He said landlords are taking a more activist role in the bankruptcies and insolvencies. He cited the fact that Brooks Brothers was acquired by Simon and a brand company.
“I expect that will happen a lot more in Canada because the landlords, few in numbers, are backed of course by OMERS and the large pension funds and have the cash to do it versus in the States there have been several bankruptcies of REITs in the past week. So Simon is certainly flush with cash, but not all of the landlords are.”
Snyder noted that there’s “no one in the towers downtown in Montreal or Toronto. Those stores are hurting. There’s just no traffic.”
How is the firt image that of a Canadian mall interior when there is signage for Macy’s and JC Penny
Ha! I didn’t even notice that — I instructed the editor to not use a noticeable Canadian shopping mall, it appears she succeeded beyond our wildest dreams. I’ll remove “Canadian” from the caption now.