WeWork, a New York-based company providing flexible, coworking workspaces, has inked a deal to acquire space in department store chain Lord & Taylor’s flagship Manhattan location for $850 million.
According to a report in Fortune, the deal will lower HBC’s debt levels and give WeWork a new headquarters in New York City. HBC owns the Lord & Taylor brand — as well as Hudson’s Bay, Saks Fifth Avenue and Galeria Kaufhof of Germany — and WeWork has plans to lease space in other HBC stores around the country.
The move underscores a trend among owners of brick and mortar retailers that need to find more revenue from their struggling retail outlets. It also showcases the different types of deals retailers and mall owners are engaging in to obtain more value from their real estate holdings.
Once WeWork moves into the Lord & Taylor building, the retail space will be reduced to 150,000 square feet — a lot smaller than the 675,000 square feet it once occupied a century ago when it was the premier retail destination in New York City, reported Fortune. The deal follows HBC’s announcement last week that its CEO, Jerry Storch, is leaving the company ahead of the holiday selling season.
HBC stock has also been under the microscope during the last year thanks to its debt levels and the pressure that department store owners have felt with the rise of Amazon and eCommerce. Rhône Capital, which teamed up with WeWork in a real estate investment fund last year, is also making a $500 million equity investment in HBC. With the Manhattan location space sale and the equity investment, HBC’s debt load will decline approximately $1.25 billion, noted the report.
HBC’s executive chairman and acting CEO, Richard Baker, said more deals with WeWork could happen.
“We have 450 locations around the world, and we think there’s an opportunity to go from four to a lot more,” Baker said at the recent Women’s Wear Daily (WWD’s) Apparel and Retail CEO Summit held in New York, Fortune reported.