Hudson’s Bay is aiming to reshape its retailing business. The company has formed a series of transactions with WeWork Companies, Rhône Capital and an affiliate of WeWork Property Advisors, a joint venture between WeWork and Rhône, which it said will create a multi-faceted strategic relationship designed to maximize the value of its global real estate assets and position its retail businesses.
The deal includes an equity investment by Rhône of $500 million in the form of eight-year mandatory convertible preferred shares. It also includes the sale of the Lord & Taylor Fifth Avenue building to WeWork Property Advisors in a transaction valued at $850 million.
The Lord & Taylor flagship store is currently expected to continue operations in the entire building through the 2018 holiday season. Thereafter the building is intended to be converted into WeWork’s New York headquarters, WeWork office space and a redesigned Lord & Taylor store of 150,000 square feet. It is expected that the acquisition of the Lord & Taylor Fifth Avenue building will close no later than August 2018.
Agreements with WeWork include the leasing of retail space within select HBC department stores, beginning with the upper floors of the Hudson’s Bay locations on Queen Street in Toronto and Granville Street in Vancouver and Galeria Kaufhof in Frankfurt. WeWork is a company that provides shared workspace, community, and services for entrepreneurs, freelancers, startups and small businesses.
Hudson’s Bay said it will benefit from the transactions with debt reduction, a stronger balance sheet and an increase in its total liquidity. The formation of the alliance is expected to produce future real estate transactions.
For WeWork, the relationship provides an opportunity to partner with HBC across its global real estate portfolio and an opportunity to attract new members through locations associated with premium retail. HBC corporate offices in New York, Toronto, Cologne, Dublin and Bengaluru will be early adopters of “Powered by We,” an operating platform that allows WeWork to combine physical spaces with digital systems to design, build and operate office space.
The companies intend to implement a reciprocal benefits program to enhance their respective product offerings. The program is expected to allow the membership of WeWork to participate in exclusive HBC sales online and in store, and HBC customers to have access to WeWork’s We Membership platform.
“HBC and WeWork have been working together to reimagine retail environments. This is a transformative partnership that rethinks how retailers create exciting environments and leverage less productive space, while substantially improving the value proposition,” said Richard Baker, HBC’s governor, executive chairman and interim CEO. “This partnership places HBC at the forefront of dynamic trends reshaping the way current and future generations live, work and shop: the sharing economy and urban and suburban mixed-use real estate planning. WeWork’s business goes beyond offering modern, shared office space by building robust communities. Our partnership creates new opportunities for HBC to redefine the traditional department store by extending those communities and drive additional traffic to our stores, particularly as we add co-working and community space to existing, vibrant retail locations.”
