Ruby Liu, a smart tiger-cub dynamic real estate entrepreneur has just launched a very big bet. She hopes to turn several more Bay properties into a chain of department stores that share her name. She hopes to have at least 20 of them open within 180 days after signing the leases. She supports this aggressive goal with a hefty $120 million budget for repairs, and $135 million for the first inventory. Her proposal has faced backlash mostly from the landlord side, who say that her vision is simply not commercially feasible.
Liu claims that she has the support of different enterprises to provide her inventory. She’s collected petitions from merchants proving they can sustain her shops. Yet these letters are not a guarantee of a formal partnership to come. Even with those short commitments, Liu is pretty optimistic as to whether her business plan can float.
Plans for Transformation
To that end, Liu imagines equipping the Bay spaces with everything from performance stages to classrooms. These’ll range from grocery stores, learning labs, senior centers, robotics showcases, and even musical acts. She wants to start adding Asian fine dining to her locations. This method draws on her imaginings of a food court based on the original at Hillcrest Mall.
Her plans go even further by calling for deep retrofits of the buildings we already have. Liu oversees exterior, structural, and MEP (mechanical, electrical, and plumbing) elements such as roofs and HVAC systems. Yet she has pledged to implement the plan with $120 million committed to that effort. She refers to this investment as “overdue” repairs on her properties.
Yet, analysts have sounded alarms over whether the long term financial viability of her plans. Liu’s proposed budget doesn’t consider any additional expenses like taxes, permitting, or premium wages for expedited labor.
“With my decades of experience in commercial real estate, it is apparent to me and Cadillac Fairview that (Liu) will fail and again leave these stores vacant.” – Rory MacLeod
Staffing and Operational Challenges
In order to carry out her ambitious expansion, Liu figures that she’ll need to bring on around 1,800 new hires. Plus, labeling all these staff members as sales personnel will help wash away their records from public view. At each of her proposed 28 facilities, that leaves just 64 employees remaining. Critics contend that this staffing model is not realistic considering the operational day to day reality of them successfully running a department store.
Beyond the secondary obligations of a third-party lessee, Liu has substantial primary financial obligations due to her leases. She’s on the hook to spend at least $43.1 million in Cadillac Fairview leases during that time span. By 2027, she’ll need to spend an additional $5.7 million just on repairing them – taxes and permit costs not included.
Landlords and real estate industry professionals have repeatedly expressed doubt on the long-term feasibility of Liu’s endeavor. They claim that her business model does not align with the reality of running a successful retail operation. This is particularly the case for assets of that size.
“An empty shell without any guarantee of financial means beyond Ms. Liu’s bare assertion that she will keep it afloat.” – Rory MacLeod
Market Reaction and Future Implications
The reaction from the commercial real estate community as a whole has been nothing short of vicious. Experts contend that Liu’s plans ignore the on-the-ground reality of how retail locations operate. That’s particularly true for sites several orders of magnitude smaller than she proposes.
As former Council member Nadia Corrado pointed out, complexity could be added with leasing agreements. She said that ownership challenges related to current malls could prevent her vision for the food court from coming to fruition. This introduces yet another layer of risk to an already difficult commercial proposition.
As Rory MacLeod pointed out, Liu’s approach is simply not grounded in the realities of the market.
“Inconsistent with a retail location even a fraction of that size.” – Rory MacLeod
Critics express concern that without a clearer financial framework and operational strategy, Liu’s ambitious project could lead to further vacancies in the already struggling retail sector.
