Bay sells iconic Lord & Taylor store
“Transactions are expected to significantly strengthen HBC’s balance sheet,” chair says
Hudson’s Bay Co. has agreed to sell its iconic Lord & Taylor building in Manhattan and unloaded a minority stake to a private equity firm to help the struggling Canadian retailer cut debt and bolster its balance sheet.
RhoneCapital will buy US$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 US$850 million. WeWork will also lease space within some Hudson’s Bay department stores, including its flagship Canadian 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. Hudson’s Bay has also come under pressure from activist investor Jonathan Litt of Land & Buildings Investment Management, who is urging the company to monetize some of its real estate holdings.
The sales to New York-based Rhone and WeWork, an officesharing firm, will help Hudson’s Bay cut debt and boost cash by a combined $1.6 billion (US$1.27 billion), and may lead to additional real estate transactions, the company said Tuesday.
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. Hudson’s Bay said it expected minimal impact on its earnings 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 monetizing the Lord & Taylor Fifth Avenue building and increasing the productivity of key locations,” Hudson’s Bay executive chair Richard Baker said in a statement Tuesday.
The sale of the Lord & Taylor building comes just four days after Baker said he will take back the reins of the struggling departmentstore chain. The 51-year-old will retake the chief executive officer job on Nov. 1 as Jerry Storch steps down. The company has hired an executive-search firm to find a new permanent CEO.
The 10-story Lord & Taylor building, 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.
The sale of the roughly 670,000square-foot building between 38th and 39th Streets is emblematic of the challenges facing the city’s landlords. Retail tenants are struggling to pay the rent as the rise of e-commerce and a shift in consumer spending habits erodes sales at brick-and-mortar stores.
The vacancy rate on Fifth Avenue, the heart of the city’s high-end shopping district and home to the most expensive retail real estate in the world, reached a record last year.