Canadian Lawyer

w w w . C A N A D I A N L a w y e r m a g . c o m A p r I L 2 0 1 5 21 obody saw Target Canada's abrupt departure from the marketplace coming, strik- ing a terrible blow to doz- ens of landlords across the country who had counted on the allure the mega retailer would bring to their shop- ping centres. With that lustre suddenly sullied, many of those property managers have sought some relief from an extra level of protection against losses provided in their leases. If only for the sheer size of the chain's presence in Canada, occupying about 15.4-million square feet of retail space, the giant retailer's short life here, and its departure under the protection of the Companies' Creditors Arrangement Act (CCAA), serves as something of a les- son for those negotiating and executing commercial leases. What happens to all the empty spaces it leaves behind and the effect its exit will have upon property owners and other tenants? And how do those original leases play into the current narrative? Of the 133 Target stores in Canada, insolvency lawyer David Ullmann, who was involved in the final negotiations on behalf of a landlord with nine Target locations, estimates that landlords for 80 to 90 of the properties had taken guar- antees from the U.S.-based Target Corp. Those without guarantees add their claim for unpaid rent or other damages to the list of unsecured creditors. A large retailer with the ability to serve as an anchor tenant in a mall or retail complex can be desirable for land- lords that may well make concessions not available to other businesses. In Target's situation, its interest in taking over for- mer Zellers locations across the country allowed the discount retailer to arrive to lease negotiations with a great deal more clout than the average tenant, resulting in the potential for the retailer to end up with enhanced control over the shopping centre. Just the same, both the landlord and tenant need to ensure they have protect- ed themselves against all eventualities. In the example of Target, key for land- lords was getting the financial backing from the U.S. parent company to ensure any money owed would be paid. "It emphasizes the importance of not being mesmerized by a large U.S. company coming to Canada," says Dennis Daoust, a commercial landlord and tenant law partner at Daoust Vukovich LLP. "In a lot of cases if [the shopping centres] were smart, they got a guarantee from the par- ent company." A major concern when a tenant leaves under bankruptcy or CCAA protection is what happens to the lease. "There's value in the leases. The problem is, there's not one big buyer out there," says Daoust partner Wolfgang Kaufmann. A complicating factor with Target r E A L E s tAt E By Marg. Bruineman Faye RoGeRS When the lustre fades Landlords need to do some serious up-front negotiations to avoid getting burned when anchor tenants fail or pack up. N

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