Canadian retail business group Hudson’s Bay Company (HBC) has signed an agreement to sell its Lord & Taylor Fifth Avenue building in Manhattan to WeWork Property Advisors for $850m.

WeWork Property Advisors is a joint venture between WeWork Companies and private equity firm Rhône Capital.

The proposed transaction is part of a series of strategic deals reached by HBC with the foregoing companies in an attempt to maximise the productivity and value of its global real estate assets.

HBC has secured a commitment from Rhône Capital for a $500m equity investment in the form of eight-year mandatory convertible preferred shares.

“Our partnership with the WeWork team creates new opportunities for HBC to redefine the traditional department store.”

HBC governor, executive chairman and interim CEO Richard Baker said: “This is a transformative partnership that rethinks how retailers create exciting environments and leverage less productive space, while substantially improving the value proposition.

“Immediately upon closing, these transactions are expected to significantly strengthen HBC’s balance sheet, enhance our liquidity, and advance our core strategies by monetising the Lord & Taylor Fifth Avenue building and increasing the productivity of key locations, which taken together, is expected to enable us to drive ongoing value creation.”

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“Our partnership with the WeWork team 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.”

Once the 2018 holiday season is completed, the Lord & Taylor building will be converted into WeWork’s New York headquarters, WeWork office space, and a redesigned 150,000ft² Lord & Taylor store.

HBC also reached agreements to lease retail space within select department stores, including the upper floors of its locations in Toronto, Vancouver and Frankfurt to WeWork.

The transaction will enable the retailer to reduce debt and/or add cash to a combined value of C$1.6bn ($1.25bn).