Lord & Taylor to Become WeWork Headquarters in NYC Flagship Sale


Hudson's Bay Company has sold the century-old Lord & Taylor flagship on Fifth Avenue in Manhattan to a WeWork Companies joint venture for $850 million.

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

Rhone Capital will also make an $632 million investment in HBC.

The sales to New York-Based Rhone and WeWork, an office-sharing firm, will help Hudson's Bay cut debt and boost cash by a combined C$1.6 billion ($1.27 billion), and may lead to additional real estate transactions, the company said Tuesday. The property was appraised recently at about $3.7 billion, according to the New York Times.

Richard Baker, HBC's executive chairman and interim CEO, said Tuesday the deals will strengthen the retailer and "enable us to drive ongoing value creation".

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The flagship store at the building in NY would continue operations through the 2018 holiday season after which it will be converted into WeWork's headquarters, the company said on Tuesday. The company now anticipates minimal impact on the earnings from these locations.

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 transaction comes as Hudson's Bay or HBC is under intense pressure from activist shareholder Land & Buildings Investment Management LLC to evaluate all strategic options to maximize value for shareholders, including monetization or repurposing of the company's real estate.

HBC's Baker credits WeWork with its ability to build active communities. A small portion will be devoted to Lord & Taylor, which will rent the space from WeWork. "The trend of urbanization is something we must all recognize and understand", he said.