Economy

Lord & Taylor sells its flagship Manhattan store to WeWork

Lord & Taylor sells its flagship Manhattan store to WeWork”

In another sign of the downfall of traditional retailing, a department store that had become a NY landmark has been sold to a company that plans to use it partly for shared office space.

Hudson's Bay Company is selling its Lord & Taylor property on New York's tony Fifth Avenue to WeWork for US$850 million as part of a flurry of deals. (TSX:HBC) is selling its Lord & Taylor Fifth Avenue building in NY to a joint venture between WeWork and Rhone Capital in a deal valued at $1.075 billion.

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.

HBC also said it has entered into agreements with WeWork to lease retail space within select HBC department stores, including the Queen Street location in Toronto, Granville Street in Vancouver and Galeria Kaufhof in Frankfurt, Germany. Ten of the building's 11 floors are now devoted to retail. But the Hudson's Bay deal with WeWork is a change in how retailers are trying to capitalize on their real estate. Big chains like Macy's had been under pressure from shareholders to get more value out of their real estate holdings. The abrupt departure of CEO Gerald Storch, announced on Friday, was an attempt by the board to "buy time and placate investors to address underperformance and undervaluation", he said. At the meeting, it plans to release proposals for Hudson's Bay, which could include removal of directors, Land & Buildings said.

HBC has repeatedly claimed its real estate is worth three times more than its current market cap.

"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. The move is expected to take place after Christmas next year.



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