Dive Brief:

• Hudson's Bay Company on Monday said it has closed the sale of its Lord & Taylor Fifth Avenue building to WeWork Property Investors for a total transaction value of CA$1.1 billion, or $850 million.

• As a result, HBC has eliminated the approximately $400 million Lord & Taylor mortgage and has reduced borrowings under its asset-based revolving facility, according to a company press release.

• WPI converted $125 million of the transaction value into a preferred equity interest in the building held by HBC through a joint venture structure, an aspect of the transaction that was previously announced.

Dive Insight:

This deal has been in the works for some time, marking just one element in an ongoing shift in New York City's retail landscape, where department stores are ceding space and sales to specialty retailers. In this case, a once-iconic department store is being transformed into a co-working space.

It's just the latest diminishment of Lord & Taylor. HBC last year was reportedly looking to unload not just the Manhattan flagship and its Skokie, Illinois, location (closed a little over a year ago after months of pressure from activist investor Land & Buildings Investment Management to sell off its best properties and deliver the proceeds to investors), but the entire chain.

Lord & Taylor is among the poorest performing players in a receding department store segment. But HBC's Saks Fifth Avenue — which is in the midst of a massive renovation to bolster its luxury stance — has also shuttered doors. Last month the department store closed down its Brookfield Place Saks Fifth Avenue women's store in Manhattan, leaving its men's store there to cater to the upscale consumer base spending their workdays in the financial district. But Lord & Taylor's efforts to stay afloat are markedly different from those of Saks. For example, rather than attempting a return to its luxury position, the department store in 2017 opened an online storefront on Walmart.com.

The rationalization of real estate is something that HBC Governor and Executive Chairman Richard Baker knows something about. He hails from a real estate family, and his entry into the department store space sprang from the opportunity in 2006 to buy Lord & Taylor, which his real estate investment firm, National Realty & Development Corp., snapped up for the relative bargain of $1.2 billion. The company also bought HBC two years later.

"This transaction reinforces HBC's ability to identify undervalued real estate investments with great potential," Baker said of the sale to WeWork (now known as The We Company). "We continue to strengthen our retail business and unlock the value of our real estate assets."

Not all department stores are disappearing from New York. Macy's maintains its iconic flagship on Herald Square, and Neiman Marcus will arrive to the city for the first time to anchor the new west side Hudson Yards development, although the retailer's debt and sales struggles have led it to scale back those plans.