Primaris Real Estate Investment Trust has announced that five of its nine Hudson’s Bay Company (HBC) store leases have been disclaimed through the ongoing court-supervised Companies’ Creditors Arrangement Act (CCAA) proceedings. The move gives the REIT full control of over half a million square feet of anchor retail space across five properties, marking a turning point in its strategic repositioning of underutilized department store real estate.
The disclaimed leases, which did not receive bids during the lease monetization process, cover stores at Cataraqui Town Centre in Kingston ON, Place d’Orleans in Orleans ON, Les Galeries de la Capitale in Québec City, Medicine Hat Mall in Medicine Hat Alberta, and Calgary’s Sunridge Mall. Collectively, these locations account for 532,100 square feet of gross leasable area (GLA) and will officially revert to Primaris on June 16, 2025.
Five Stores Disclaimed, Major Vacancy Introduced
The loss of HBC as a tenant will lower Primaris’ pro forma portfolio occupancy from 93.2% to 89.5%. The financial hit includes a $5.5 million reduction in annualized revenue and a $3.9 million drop in annualized net operating income (NOI).
However, Primaris says it views this as a value-creation opportunity. “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, Chief Executive Officer. “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.”
Redevelopment Plans Already Underway
Primaris has been preparing for this possibility and is now accelerating its re-tenanting and redevelopment strategy. The REIT expects to invest between $50 million and $60 million across the five disclaimed locations, reducing the overall footprint from 532,100 square feet to about 475,000 square feet. Initial occupancy by new tenants is expected in Q2 2026, with rents beginning to flow as early as 2027.
According to the company, the redevelopment will generate $4 million to $5 million in annual NOI, translating into an 8% to 9% yield on invested capital.
“There is strong tenant demand for our HBC boxes, and we are in discussions with strong covenant, high-quality national retailers, including large format tenants,” said Patrick Sullivan, President and Chief Operating Officer. “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.”
Unlocking Land and Lifting Restrictions
Primaris also gains considerable flexibility in how it can use the real estate. The REIT will be relieved of obligations tied to 1,866 parking spaces — about 13 acres of land — and will no longer face “no-build” restrictions on 71 acres, including the nine acres currently occupied by HBC stores.
“All of these properties now offer significant intensification opportunities spanning retail outparcels, the potential sale of excess lands for multi-residential, hotel, or other high density uses, and the future expansion of the malls themselves,” noted the company.
The departure of HBC also removes a potential drag on mall performance. “Regained control of these leases offers further indirect financial and qualitative benefits to the shopping centres, such as the halo effect on sales and rents from adjacent tenants following re-tenanting, or the positive impact on capitalization rates and valuations for properties that replace underperforming tenancies with new, stronger retailers,” the company stated.
Remaining Leases Subject to Bids
Four other HBC locations in the Primaris portfolio — at Conestoga Mall (Waterloo), Orchard Park (Kelowna), Oshawa Centre (Oshawa), and Southgate Centre (Edmonton) — remain subject to bids through the CCAA process. Combined, these leases represent 498,770 square feet of space, or about 3.5% of Primaris’ total GLA. The spaces generate $5.4 million in gross rental revenue annually and $2.0 million in net rental income.
Primaris believes it will have “significant influence” over the outcome of these bids. This is due in part to the extensive deferred maintenance across the HBC locations and the capital that will be required to restore them for ongoing retail use.
Ongoing Uncertainty Around Remaining Sites
As of now, the company has limited visibility into the nature of the bids or the retailers behind them. “Limited information is available about these bids, including any retailer plans or requested lease modifications,”
Primaris said in a statement. “We are not yet able to comment on the viability of the operating strategies or financial strength of the retailers bidding on these locations.”
Notably, two of the four leases — at Oshawa Centre and Southgate Centre — were acquired by Primaris in January 2025 as part of a $585 million transaction, just weeks before HBC filed for creditor protection.
Vancouver-based entrepreneur Weihong (Ruby) Liu recently announced that she had won bids on 28 Hudson’s Bay stores. On Chinese social media app RedNote, Primaris was mentioned as a landlord for at least some of these. Canadian Tire also said it bid on several HBC stores, with locations currently unknown.
Co-Tenancy Clauses Have Minimal Impact
Only 27 of the over 2,800 leases in the Primaris portfolio include co-tenancy clauses tied to HBC. Thirteen of those clauses relate to the five disclaimed stores, while 14 pertain to the four stores currently subject to bids.
Primaris estimates the total impact from these clauses on 2025 rental revenue will be less than $2 million and says it is actively working to reduce that number to zero. In many instances, mitigation strategies and tenant-specific arrangements may allow the REIT to circumvent reductions in rent or lease obligations.
2025 Financial Guidance Remains Intact
Despite the upheaval, Primaris has reaffirmed its financial and operational guidance for the 2025 fiscal year. The company first issued this guidance on February 13, prior to HBC’s CCAA filing, and reiterated it during Q1 results in April.
“Disciplined capital allocation is a key pillar to Primaris’ strategy,” the REIT stated, emphasizing its commitment to transparency and stability. “Providing financial and operating guidance is not only helpful for investors and analysts… it also creates a rigorous discipline for management.”
Context: The Fall of HBC and Real Estate Ripples
HBC filed for creditor protection under the CCAA on March 7, 2025, citing unsustainable operating losses and mounting debt. Since then, the company has been liquidating inventory and working with a court-appointed monitor to monetize its remaining assets — including leases, trademarks, and valuable historical artifacts.
The broader retail real estate market is still absorbing the fallout. Earlier in May, RioCan REIT disclosed a $209 million loss on its investment in a joint venture with HBC. Canadian Tire has since announced it will acquire the Hudson’s Bay intellectual property portfolio for $30 million.
For Primaris, however, the HBC lease disclaimer represents an opportunity to turn disruption into long-term upside.
“Primaris REIT has been preparing for the departure of HBC, as its department store peers downsized and ceased operations over the past 15 years, including Zellers, Target and Sears,” said Sullivan in a previous statement. “The departure of Canada’s final conventional department store will enable future value creation for our stakeholders, paving the way for optimal use of space that better reflects the evolving needs and desires of the growing communities.”
“We are confident that the quantitative and qualitative benefits of regaining control of these spaces will be materially positive for our properties and our unitholders.”
I have my fingers crossed Primaris is able to purchase back the lease at Conestoga Mall here in Waterloo! They seem to know what they’re doing and have been doing a great job getting the right tenants since they purchased the mall.
Primaris keeps trying but it has no luck with The Medicine Hat Mall, my guess that will be the demolished Bay. Then when complex falls they will tear that mini anchor down. Malls in cities like Medicine Hat are coming to an end.