March 29, 2018 / 2:00 PM / a year ago

UPDATE 1-Hudson's Bay to hand over Manhattan office lease to Jay Suites

(Updates with details of the deal, context)

By Nichola Saminather

TORONTO, March 29 (Reuters) - Canadian department store operator Hudson’s Bay Co has agreed to hand over the remaining lease of its Manhattan office building to co-working space provider Jay Suites, the latter’s President Juda Srour told Reuters on Thursday.

The 90,000 square-foot (8,361 square-meter), 12-storey building is next to the Lord & Taylor store property that Jay Suites rival WeWork Co bought last year from HBC, Srour said.

The asking rent for 15 W. 38th Street, owned by The Rosen Group, a privately-held real estate development and management company, is $45 per square foot and the lease has 17 years left on it, Srour said, declining to provide the rent the company will actually pay. It was not clear immediately if HBC has other leased office properties in Manhattan.

HBC and The Rosen Group did not offer an immediate comment.

HBC shares were up 1.1 percent in early Thursday trade, while the benchmark Canadian share index was up 0.7 percent.

The move comes as Hudson’s Bay struggles to overcome a tough retail environment for department stores as customers gravitate to online and specialty offerings. The company put in place a transformation plan last year to cut costs and has been trying to monetize the value of its substantial real estate holdings.

As part of that effort, Hudson’s Bay sold its Lord & Taylor flagship on Fifth Avenue to WeWork for $850 million. Hudson’s Bay is also seeking a buyer for its downtown Vancouver flagship store, which it owns in a joint venture with Canadian property trust Riocan REIT.

The owner of the Saks Fifth Avenue and Lord & Taylor brands on Wednesday reported fourth-quarter earnings that missed estimates but said the transformation plan, which caused business disruptions and weighed on results during the quarter, will generate annual savings of C$350 million ($271.2 million) by this fiscal year’s end.

Hudson’s Bay vacated the Manhattan office building about four months ago following 2,000 job cuts the company announced last year, Srour said. The companies have been negotiating for about eight months, he said.

“It was always a dream to rent a full building,” Srour said. “It’s very rare that you’ll find an empty full building in Manhattan. It’s also a prime location.”

Jay Suites will move its headquarters into the building in the next four to six months, according to Srour. ($1 = 1.2907 Canadian dollars) (Reporting By Nichola Saminather Editing by Chizu Nomiyama and Marguerita Choy)

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