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Mass Transfers and Tenant Chain Sales: Advice for Landlords

By Jeanne Banka

The rumor that the retailing giant, Target Stores, may be taking over one of Canada's oldest and most venerable department store retailers, the 334-year-old Hudson's Bay Company (“The Bay”), and/or its junior department store discount division, Zellers, has left many Canadian landlords scrambling to review their leases in order to ascertain their rights. Many landlords will find that Target may be able to slip into The Bay's shoes without the necessity of having to obtain the landlords' consent to the transaction. Target's entry into Canada may prove to be as seamless and effortless as Wal-Mart's successful entry into the Canadian market a decade ago through its subleasing of stores from F.W. Woolworth & Company, a feat that was achieved for the most part without the necessity of landlord consent.

Purchasing a chain of stores or locations provides a retailer with instant entry into new markets, or a means of expanding within existing markets, on either a regional, statewide or federal basis. The retailer's goal is to complete the purchase transaction totally unhindered by the requirement to obtain the landlords' consent to the lease transfers and not to do anything more than notify landlords (usually after the fact) that the leases have changed hands. Conversely, the landlord's goal is to ensure that it maintains control of its real estate, its merchandise mix and receives a strong financial covenant from the transferee.

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