Troubled Canadian retailer group Hudson's Bay has sold its flagship Lord & Taylor property on Fifth Avenue in New York to WeWork Property Advisors for $850 mln (€645 mln), and inked an agreement allowing flexible office concept WeWork to leverage its global property platform, including assets in Germany and Belgium.
The sale of one of its prime real estate holdings follows the demands of activist shareholder Jonathan Litt of Land and Buildings Investment Management to unlock liquidity, provoking the resignation of CEO Gerald Storch last week.
The once highly successful global department store retailer currently holds property worth five times its total retail value, and company performance has been lagging expectations. Hedge fund Land and Buildings stepped up its interest in Hudson's Bay to 4.3% in June.
WeWork Property Advisors is a joint venture of WeWork and investor Rhone Capital. As part of the Lord & Taylor deal, Rhone Capital has invested another $500 mln (€430 mln) in the retail business, gaining a seat on the Hudson's Bay board and becoming a 22% shareholder.
The Hudson's Bay board is also under pressure to divest its most prized asset, the Saks Fifth Avenue store which was valued at $3.7 bn (€3.18 bn) in 2014.
Co-working opportunities
WeWork will use some of the space in the Lord & Taylor property as its headquarters, leasing a smaller percentage of the asset back to Hudson's Bay for its continuing department store activities. The global deal will see the space above stores in Toronto, Vancouver and Frankfurt's Galeria Kaufhof redeveloped into offices managed by WeWork.
In the future, WeWork will be able to convert unoccupied retail space into offices across the global portfolio. This currently comprises 61 million ft2 (5.6 million m2) of real estate across the United States, Canada and Europe, including department store brands Hudson's Bay, Lord & Taylor, Saks Fifth Avenue, Gilt, Saks Off Fifth, Germany’s Galeria Kaufhof and Belgium's Galeria INNO.
In September, Hudson's Bay opened the first of 15 planned Dutch department stores as part of a €300 mln rollout in the Netherlands, opening its first Hudson's Bay branded stores outside of Canada.
