Hudson's Bay sells iconic Lord & Taylor store to cut debt
Oct 25 2017
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.
The Lord & Taylor location will continue to operate in the whole building through holiday 2018. After that, Lord & Taylor will occupy a smaller redesigned space in the building.
The sale comes as Canada-based Hudson's Bay, which also owns Saks Fifth Avenue and other department stores, faces pressure from investment companies to create more value for shareholders.
Canadian department store operator Hudson's Bay Co agreed to sell its Lord & Taylor building for $850 million to SoftBank-backed WeWork Cos and shrink the flagship store on New York's Fifth Avenue to a quarter of its current size, HBC said on Tuesday. As a part of the deal, Rhône will take a minority stake in the company, purchasing $500 million (632 million Canadian) in convertible shares.
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.
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.
"This is a transformative partnership that rethinks how retailers create exciting environments and leverage less productive space, while substantially improving the value proposition", said Richard Baker, HBC's executive chairman and interim CEO in a statement.
In August, news spread that HBC was planning to hire a financial advisor to review all options, including taking the company private, exiting some retail businesses and offloading key real estate holdings.
They said WeWork's members will be able to participate in exclusive HBC sales online and in store, and HBC customers to have access to WeWork's We Membership platform.
According to a release from HBC, the transaction is expected to result in an aggregate of $1.6 billion of debt reduction and or incremental cash on the company's balance sheet - and an increase in total liquidity of approximately $1.1 billion, according to a release from the company.