Hudson’s Bay and its HBS Global Properties real estate venture will retain ownership of all owned and ground-leased real estate assets related to Lord & Taylor. Through at least the initial three years, Hudson’s Bay has agreed to maintain economic responsibility for the rent payments owed by Lord & Taylor at the locations operated by Le Tote. Hudson’s Bay says this amounts to about $77 million in total cash rent on an annual basis.

Hudson’s Bay says that beginning in 2021, it will reassess the use of Lord & Taylor units and recapture certain stores to determine their best use, including their possible redevelopment as mixed-use properties offering a variety of services, experiences and retail offerings.

Hudson’s Bay also says it hired a team to oversee the planning and execution of any redevelopment, which the company calls an inherently complex and capital-intensive long-term project. For any recaptured or returned stores, Hudson’s Bay retains long-term rent responsibility.

“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,” Hudson’s Bay CEO Helena Foulkes said in a press release. "Following an extensive review of strategic alternatives, Le Tote’s leadership and innovative approach is the best path forward for Lord & Taylor [and] its loyal customers and dedicated associates. For HBC, this transaction builds upon our previous bold actions, further enabling us to focus on our greatest opportunities: Saks Fifth Avenue and Hudson’s Bay.”

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Le Tote, established in 2012, is a fashion subscription service through which customers can rent clothing and accessories for a flat monthly fee. Members can keep the items for as long as they wish and also have the option to purchase them at a discount. Le Tote’s data-driven model is powered by proprietary algorithms and in-house operational platforms. Le Tote works with hundreds of brands, including BCBGeneration, Calvin Klein, Kate Spade and French Connection. The company has raised venture funds from Simon Venture Group, among others.

In fiscal 2018 Lord & Taylor accounted for some $1.4 billion of Hudson’s Bay’s $9.4 billion in sales. The Hudson’s Bay portfolio comprises roughly 300 stores across the Hudson’s Bay, Lord & Taylor, Saks Fifth Avenue and Saks Off 5th banners.