Hudson's Bay Sells Lord & Taylor Building to WeWork to Cut Debt

NEW YORK, United States — Hudson's Bay Co. agreed to sell its flagship Lord & Taylor building in Manhattan and unloaded a minority stake to a private equity firm to help the Canadian retailer cut debt and bolster its balance sheet by a combined C$1.6 billion ($1.27 billion).

RhoneCapital LLC will buy $500 million worth of convertible shares in Hudson’s Bay, and Rhone is teaming up with WeWork Cos. to buy the Lord & Taylor building on Fifth Avenue for $850 million. WeWork will also lease space within some of Hudson’s Bay department stores, including its flagship outlet on Queen Street in Toronto.

The agreement brings some respite to the Toronto-based owner of Saks Fifth Avenue, which has been cutting thousands of jobs as it copes with an industry wide slump for department stores. It also came under renewed pressure from activist investor Jonathan Litt of Land & Buildings Investment Management, who is urging the company to monetise some of its real estate holdings.

The Lord and Taylor building will continue to operate though the 2018 holiday season. It will then become WeWork’s New York headquarters and office space, while hosting a revamped store. The company said it expected minimal impact on its earnings there from the sale because the store is “many times less productive than the Saks Fifth Avenue flagship building.”

"Immediately upon closing, these transactions are expected to significantly strengthen HBC's balance sheet, enhance our liquidity, and advance our core strategies by monetising the Lord & Taylor Fifth Avenue building and increasing the productivity of key locations," Hudson's Bay Executive Chairman Richard Baker said in a statement on Tuesday.

The 10-story Lord & Taylor building near 39th Street, erected in 1914, is known for its distinct Italian Renaissance style and was named a city landmark a decade ago. The iconic property is one of the city’s oldest retail stores and traces its origins to the dry goods stores established by Samuel Lord and his partner George Washington Taylor in 1826.

By Sandrine Rastello; Editors: Crayton Harrison, David Scanlan, Christine Maurus