It looks like one of the most famous retailers of the 20th century is set to sell its flagship New York store to one of the most valuable start-ups of 2017. The New York Times reports that Lord & Taylor’s signature location on Fifth Avenue in Manhattan has been purchased by office-space magnate WeWork as part of a reported $850 million joint venture. Lord & Taylor, which negotiated the deal through parent group Hudson’s Bay Company (HBC), will retain a quarter of the 103-year-old limestone structure’s 676,000 square feet. To do so, the retailer will consolidate the footprint of its flagship department store on the building’s bottom floors.
Though the transfer of power won’t be complete until after the 2018 holiday season, the purchase agreement puts to rest the significant speculation about what was in store for the officially designated New York City landmark’s future. Though some believed the space would turn into a skyscraper full of condos, the partnership with WeWork more or less suggests that the 11-story limestone, Renaissance-style building will maintain its current façade.
The real estate transaction not only signals WeWork’s desire to own big buildings outright, but also a concession by Hudson’s Bay Company that their path to profitability lies not in brick-and-mortar shopping, but in property sales. The Lord & Taylor sale (plus further investment from WeWork venture partner Rhône Capital) pushes HBC’s haul north of $1 billion. It gives them the capital they need to hold onto the even more valuable and iconic Saks Fifth Avenue flagship store—for now.
Selling a building that drew 75,000 visitors when Lord & Taylor opened in 1914 would seem to signal the death rattle of retail. But HBC Executive Chairman and Interim CEO Richard Baker believes the building’s two major tenants can coexist. "This partnership places HBC at the forefront of dynamic trends reshaping the way current and future generations live, work, and shop," he said in a press release.
Of course, it’s hard not to see WeWork as the more optimistic party in the deal. “Retail is changing, and the role that real estate has to play in the way that we shop today must change with it,” said cofounder Adam Neumann. “The opportunity to explore this trend was too good to pass up.” With a celebrated Manhattan landmark set to play the role of WeWork headquarters and $4.4 billion of Japanese capital in their back pocket, expect the world’s biggest real estate startup to make more moves like this in the future.
