Dive Brief:

• Hudson’s Bay on Tuesday said it has made a deal to sell an iconic Fifth Avenue property housing its Lord & Taylor flagship to the office space startup WeWork for $850 million, both companies said in a press release. Lord & Taylor will operate in the space through the 2018 holiday season, after which time WeWork plans to build its New York headquarters in the space, according to the release. The plans leave room (about 150,000 square feet) for a downsized Lord & Taylor on the property. 
• ​The companies expect to close on the deal no later than Aug. 10, 2018. Hudson’s Bay also plans to start leasing some space in its department stores to WeWork, including stores in Toronto and Vancouver.
• WeWork’s partner on the property deal, investment firm Rhône Capital, is also planning to make an equity investment of $500 million in Hudson’s Bay. The companies expect that the joint venture between Rhône and WeWork on the Fifth Avenue property will end up owning some of that stock. Hudson’s Bay, parent of Lord & Taylor and Saks, said proceeds from the deal would reduce its debt by $1.6 billion in Canadian dollars ($1.26 billion U.S.) and increase liquidity by $1.1 billion Canadian dollars ($870 million U.S.).

Dive Insight:

Hudson’s Bay has made a major concession to its shareholders who have been agitating for the company to convert more of its owned property into cash. It’s worth noting, too, that the announcement shortly follows the abrupt departure of the retailer’s CEO, Jerry Storch.

So far, Hudson's Bay has not made a deal for its crown jewel — the famed Fifth Avenue Saks store that is worth, at least according to the activist fund pressing for the department store retailer to sell the property, $5 billion Canadian dollars (or around $4 billion U.S.).

Still, it's a significant move and it shows a willingness in Hudson’s Bay’s management to give up treasured property. The New York Times, in covering the sale, described the building, which opened a century ago, as "an icon of old-school retail."

The activist, Land & Buildings, led by founder Jonathan Litt, issued a ferocious statement on Monday following the departure of Storch. Litt and his team described Storch’s departure as a "consolidation of power" on Baker’s part that underscored "the board’s attempt to buy time and placate investors to address underperformance and undervaluation."

Land & Buildings added that it has no confidence in the board and plans on calling a special meeting of investors at some point. At the meeting, it plans to release proposals for Hudson’s Bay, which could include removal of directors, Land & Buildings said.

"[I]t is typical for undervalued and struggling companies such as Hudson’s Bay to try to position the exit of top executives as a reason for investors to give them more time to right the ship," the firm said in its statement. "Jerry Storch is only the most recent casualty at the company, joining several other senior executive departures," including CFO Paul Beesley and Brian Pall, former president of HBC Real Estate.

The statement went on to say: "In reality, Executive Chairman Richard Baker, who will be taking on the role of interim CEO, continues to call the shots. This is even more problematic given how Baker has been stonewalling Land & Buildings and the investment community regarding a plan to unlock the value of the real estate embedded in the Company."

Storch, who plans to return to his advisory firm, Storch Advisors, is the second top executive to leave this year, after Beesley's May departure. Beesley moved back to Canada from New York to be closer to his family, according to the company and was replaced by Edward Record in August.

Adding to the drama at Hudson’s Bay this year, the retailer was also reportedly in talks to acquire both Macy’s and Neiman Marcus, but those talks broke down in both cases (with Macy’s because the price was too steep, and with Neiman Marcus because the accompanying debt load was too high).

In recent days, reports have also surfaced that the company's Lord & Taylor brand will begin selling on Walmart.com.