Hudson's Bay sells iconic Lord & Taylor store to cut debt

HBC to sell Fifth Avenue flagship Lord & Taylor store

The purchase of Lord & Taylor's Fifth Avenue building took place through affiliates of WeWork Property Advisors - a joint venture between WeWork and Rhône.

Under the deal, Lord & Taylor will sell its almost 676,000 square-foot flagship to WeWork for $850 million after the 2018 holiday season.

The Lord & Taylor store in NY will operate through the 2018 holiday season, then be reduced in size to 150,000 square feet from the current 650,000 square feet, with the building converted to WeWorks' headquarters.

The 676,000-square foot-building on Fifth Avenue in New York City will sell for $850 million, and WeWork partner Rhone Capital will invest another $500 million in Lord & Taylor parent company Hudson Bay, The New York Times reported.

He added that WeWork, which provides shared workspace for entrepreneurs and startups, is paying a 30 percent premium to the Lord & Taylor building's last appraised value.

"As we've said and done in the past multiple times, if there's an opportunity for someone to give us a very high valuation on one of our assets, we'd be willing to sell it", Richard Baker, HBC executive chairman and interim chief executive officer, told Reuters.

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The retail group has been under pressure for some time to create value from some of its real estate holdings.

"The path to maximizing the value of Hudson's Bay lies in its real estate, not its retail brands", Jonathan Litt, the founder of Land and Buildings Investment Management, wrote in a letter to the board of Hudson's Bay in June.

Lord & Taylor's Fifth Avenue flagship in 2006.

As the retail industry tries to cope with falling foot traffic and the e-commerce surge, retailers are attempting to reimagine their physical spaces through redevelopments that shrink their footprints as Kohl's is doing, selling floors in key locations as Macy's has done and redesigning customer traffic flow to accommodate in-store and online shoppers better, as Target is in the midst of.

The deal is expected to result in debt reduction of $1.26 billion and liquidity of about $870 million in US dollars. "People from every walk of life are seeking spaces in big cities that allow for human connections".

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