RTTNews.com) - Canada-based department store operator Hudson's Bay Co. (HBC.TO) said Tuesday that it has agreed to sell the Lord & Taylor Fifth Avenue building in New York to WeWork Property Advisors in a deal valued at $850 million, or C$1.075 billion.
The transaction comes as Hudson's Bay or HBC is under intense pressure from activist shareholder Land & Buildings Investment Management LLC to evaluate all strategic options to maximize value for shareholders, including monetization or repurposing of the company's real estate.
HBC announced the deal as part of a series of strategic transactions with WeWork Companies, Rhone
Capital and an affiliate of WeWork Property Advisors, a joint venture between WeWork and Rhone.
HBC said that the Lord & Taylor flagship store will continue to operate in the entire building through the 2018 holiday season. Thereafter, the building will be converted into WeWork'sNew York headquarters and office space, as well as a redesigned Lord & Taylor store of about 150,000 square feet.
HBC currently anticipates minimal impact on its earnings from the sale of the Lord & Taylor Fifth Avenue building, which is many times less productive in comparison to the Saks Fifth Avenue flagship building.
In addition, Rhone Capital will make $500 million equity investment in HBC in the form of eight-year mandatory convertible preferred shares. This will be initially convertible into HBC's common shares at $9.82 or C$12.42 per share, with the conversion price subject to adjustment from time to time in accordance with the terms of the preferred shares.
HBC also said it has entered into agreements with WeWork to lease retail space within select HBC department stores, including the Queen Street location in Toronto, Granville Street in Vancouver and Galeria Kaufhof in Frankfurt, Germany. The company currently anticipates minimal impact on the earnings from these locations.
HBC expects the transaction to result in an aggregate debt reduction of C$1.6 billion and an increase in total liquidity of about C$1.1 billion.