Iconic Retailer Lord & Taylor to be Acquired in $100M Deal

John Jordan | August 2019

Lord & Taylor’s store at the Ridge Hill shopping center in Yonkers.

SAN FRANCISCO—Le Tote Inc. a women’s fashion rental subscription service based in San Francisco, has reached an agreement with Hudson’s Bay Co. of Toronto to acquire iconic retailer Lord & Taylor.

Lord & Taylor has a significant presence in the New York metro area, including stores in Eastchester, Yonkers and West Nyack in the Hudson Valley. Earlier this year, co-working space provider WeWork acquired Lord & Taylor’s flagship store in New York City for $850 million and shut down the location. The company had previously announced plans to shutter up to 10 of its locations, according to a report on commercial real estate website Globest.com.

The deal announced on Aug. 28 calls for Hudson’s Bay Co. to receive $75 million in cash upon the transaction’s closing and a secured promissory note for $25 million payable in cash after two years. In addition, HBC will receive an equity stake in Le Tote, two seats on the company’s Board of Directors and certain rights as a minority shareholder.

HBC and HBS Global Properties, HBC’s real estate joint venture, will retain ownership of all owned and ground-leased real estate assets related to Lord & Taylor, which began operations in 1826. For at least the initial three years, HBC has agreed to maintain economic responsibility for the rent payments owed by Lord & Taylor at the locations operated by Le Tote. Net of HBC’s distributions from HBS Global Properties, HBC expects to continue to be liable for approximately $77 million in Lord & Taylor total cash rent on an annual basis.

Le Tote will acquire the Lord & Taylor brand and related intellectual property while assuming operations of 38 stores, Lord & Taylor’s digital channels and the associated inventory.

Helena Foulkes, HBC’s CEO, says of the deal, “We’re excited to have reached an agreement with Le Tote that creates a new model for Lord & Taylor, bringing together fashion rental subscriptions with traditional retail. Following an extensive review of strategic alternatives, Le Tote’s leadership and innovative approach is the best path forward for Lord & Taylor, its loyal customers and dedicated associates.

She adds that for HBC the transaction will enable the firm to to focus on our greatest opportunities, Saks Fifth Avenue and Hudson’s Bay.

Rakesh Tondon, Le Tote’s CEO and founder, said, “Since founding Le Tote, it’s been our mission to push the boundaries of retail. We’ve strived to lead the charge in developing innovative, intuitive, value-driven ways for customers to engage and consume. We’re excited to bring Le Tote together with Lord & Taylor, a storied brand that has stood for quality, style and service for nearly two centuries. With this acquisition, we continue our journey in creating the future of retail.”

Le Tote expects to extend employment offers to the vast majority of Lord & Taylor’s associates and says it is currently in the process of securing financing for the full purchase price. The transaction is expected to close before the start of the 2019 holiday season. If committed financing has not been obtained within 45 days following the agreement signing, HBC has the right to terminate the agreement.

Starting in 2021, HBC and Le Tote will have options to reassess the Lord & Taylor store network. This may include HBC recapturing select locations to determine their highest and best use, including possible redevelopment into mixed-use properties with a variety of services, experiences and retail offerings. HBC has hired a team of professionals to lead the planning and execution of any redevelopment, which is an inherently complex, capital intensive, long-term project. For any recaptured or returned stores, HBC retains long-term rent responsibility, risk and costs for redevelopment.

PJ SOLOMON acted as financial advisor to HBC for this transaction and throughout the review of strategic alternatives for Lord + Taylor and Willkie Farr & Gallagher LLP acted as legal advisor to HBC. Le Tote was advised by Citi, as its financial advisor, and Kirkland & Ellis LLP, as its legal advisor, in connection with the transaction.

 

John Jordan
Editor, Real Estate In-Depth