WeWork Finally Closes $850M Buy of Former Lord & Taylor Flagship
WeWork and partner Rhône Capital have closed on their $850 million purchase of the former Lord & Taylor flagship location at 424 Fifth Avenue, more than a year after announcing the acquisition, the companies announced today.
WeWork Property Investors—the name of the joint partnership between WeWork, recently rebranded as The We Company, and Rhône—bought the 676,000-square-foot property from Lord & Taylor parent company Hudson’s Bay Company, which has been struggling and closed 10 Lord & Taylor locations earlier this year to focus on e-commerce, as Commercial Observer previously reported.
“The completion of this transaction, which will see us bring new life to the iconic Lord & Taylor building, reflects the evolution of the We Company, the diversification of our real estate strategy and the company’s ongoing transition from an occupier to an operator of space,” a spokesman for WeWork said in a statement.
The Canada-based Hudson’s Bay will still own a $125 million minority stake in the building between West 38th and West 39th Streets and touted in a release that the sale allows it to remove the nearly $400 million mortgage on the building from its books.
“We’ve fortified our balance sheet in short order,” Richard Baker, HBC’s governor and executive chairman, said in a statement. “Since the end of fiscal 2017, we’ve paid down approximately CAD $1 billion [about $75 million] in debt, providing us flexibility to support our business goals and advance our strategy.”
The deal was originally announced in 2017 and with a closing date in August 2018, but it was pushed back several times with WeWork and Rhône paying millions to extend the deadline, The Real Deal reported. Spokespeople for Hudson’s Bay and WeWork would not comment on why the sale was delayed.
Plans originally called for WeWork to take over 75 percent of the building while Lord & Taylor would keep a smaller presence on the lower levels. However, in June 2018, Hudson’s Bay announced it would shutter the century-old flagship at 424 Fifth Avenue along with nine of its 48 stores across the country, as CO reported. WeWork will now occupy the entire property. A spokesman declined to talk about the company’s plan for the site.
Hudson’s Bay, which also owns Saks Fifth Avenue, Saks OFF 5th and Home Outfitters, has hit rough times in recent years with declining sales at its stores. In its most recent earnings statement, covering the three months that ended on Nov. 3, 2018, the company reported a net loss of $124 million, higher than the $116 million loss from 2017, Reuters reported.