Hudson’s Bay Co. (HBC) said yesterday that it's selling its Lord & Taylor flagship store on Fifth Avenue in New York City for $850 million to WeWork Companies, a provider of shared workspace, community and services for entrepreneurs, freelancers, startups and small businesses. HBC is getting an equity investment of $500 million from Rhone Capital, a global investment management firm with a real estate joint venture with WeWork. The 650,000-square-foot Lord & Taylor store will continue operations through the 2018 holiday season. Under the deal, after the 2018 holiday season, the building will be converted into WeWork’s New York headquarters, WeWork office space, and a redesigned Lord & Taylor store of 150,000 square feet. HBC said it anticipates minimal impact on its earnings from the sale of the flagship, which, in comparison, is many times less productive than the Saks Fifth Avenue flagship building.
Total Retail's Take: The HBC/WeWork deal makes sense on several levels for both parties. First, the sale of the Lord & Taylor building will help HBC redefine the traditional department store, and thereby bring additional traffic to the store. As department stores grapple with declining traffic, businesses are trying to come up with new ways to reimagine the spaces so consumers have a reason to shop in-store. Giving consumers — millennials specifically — a space to work that's right beside Lord & Taylor merchandise should make it convenient for them to purchase. For WeWork, the deal offers access to HBC's global real estate portfolio, which means it can attract new members through locations associated with premium retail. Both benefit in that the program will allow the global membership of WeWork to participate in exclusive HBC sales online and in-store, and HBC customers gain access to WeWork’s We Membership platform.