"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".
HBC said that the Lord & Taylor flagship store will continue to operate in the entire building through the 2018 holiday season.
Hudson's Bay Company has sold the century-old Lord & Taylor flagship on Fifth Avenue in Manhattan to a WeWork Companies joint venture for $850 million.
In addition, Rhône Capital, which partnered with WeWork in a real estate investment fund previous year, will make a US$500 million equity investment in HBC.
Hudson's Bay estimated that the overall deal would result in $1.6 billion in cash on its balance sheet and reduced debt.
The Lord & Taylor flagship location will eventually house a smaller store as well as the NY headquarters of WeWork, which provides working space and services for more than 150,000 members around the world. They can be converted into an equal number of HBC common shares, which represent a 21.8 per cent stake in the company.
Illustrating the state of these retail locations, the company said it expects "minimal impact on earnings" from the deal. After that, the store will shrink to 150,000 square feet (the 12-story building is 676,000 square feet) with the rest of the space devoted to WeWork's NY headquarters.
Land & Buildings holds about 5 percent of HBC shares. The property was appraised recently at about $3.7 billion, according to the New York Times.
In August, news spread that HBC was planning to hire a financial advisor to review all options, including taking the company private, exiting some retail businesses and offloading key real estate holdings.
WeWork Cos said on August 24 it received an additional $3 billion investment from Japan's SoftBank Group and its Vision Fund to ramp up its expansion globally.
"Retail is changing and the role that real estate has to play in the way that we shop today must change with it", co-founder and chief executive Adam Neumann said in a release. The Italian Renaissance building was specially designed for the retailer-part of the long march uptown over the 19th and early 20th centuries by the ascendant wealthy and the venues that catered to them, and one of many elaborate temples to commercial culture built in the era.