The Hudson Bay Co. closed on the sale of the Lord & Taylor Fifth Avenue building to WeWork Property Investors for $850 million, as expected.

“This transaction reinforces HBC’s ability to identify undervalued real estate investments with great potential,” said Richard Baker, HBC’s governor and executive chairman. “We continue to strengthen our retail business and unlock the value of our real estate assets.” The deal enables HBC to eliminate the $400 million mortgage it had on the Lord & Taylor property and also reduce borrowings under its asset-based revolving facility.

“We’ve fortified our balance sheet in short order,” Baker continued. “Since the end of fiscal 2017, we’ve paid down approximately Canadian $1 billion [$750 million U.S.] in debt, providing us flexibility to support our business goals and advance our strategy.”

WeWork Property Investors is the real estate investment fund  jointly controlled by WeWork and Rhône Capital.

HBC continues to seek to monetize certain real estate assets including its Hudson Bay flagship real estate in Vancouver, which is up for sale.

The historic Lord & Taylor flagship, located between 38th and 39th Streets on Fifth Avenue, closed in early January. The store operated on the site for 104 years.

As previously reported, WeWork, which operates shared work spaces around the world, exercised its option to convert $125 million of the transaction value into a preferred equity interest in the building held by HBC through a joint venture structure.

WeWork previously disclosed to WWD that it intends to convert the lower, main and second levels of the former Lord & Taylor flagship into new kinds of retailing, but not Lord & Taylor. The rest of the eleven-story, 650,000-square-foot site is expected to become a WeWork headquarters. WeWork recently re-branded as The We Company to better reflect its philosophy of connecting people and growing services through its shared workspace format.

The former L&T flagship was given landmark status 11 years ago. It has several special architectural features that WeWork intends to preserve including the bay windows, the bronze entryway on Fifth Avenue, and the rooftop. Bay windows were blocked off years ago and WeWork wants to restore them to their original size. Upper-level windows will also be restored.

The rooftop has been barely used in recent years, except for an occasional party, wedding or special event for the store. It could be used as an amenity for office workers, which was its original intention.

WeWork also intends to preserve the limestone Lord & Taylor emblems on the Fifth Avenue facade, as well as the sixth floor balconies, which will be restored.

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