01/27/2014 10:03 EST | Updated 03/29/2014 05:59 EDT

HBC sells flagship Toronto store, will open Saks location

Hudson's Bay Co. is selling its iconic Queen Street store in downtown Toronto to the company that owns the Eaton Centre, and will convert part of the existing store into a Saks location.

HBC will receive $650 million from Cadillac Fairview in the deal to sell the store and the adjoining Simpson's Tower, at the corner of Queen and Bay Sts.

As part of the deal, HBC will lease the property back from Cadillac for 25 years and convert part of the location into a Saks Fifth Avenue. HBC bought Saks in a deal last year and quickly announced plans to bring the brand to Canada. The downtown location will see a 150,000-square-foot Saks location operating alongside the existing Bay store.

The deal comes with an option to be extended for 50 years beyond the initial 25.

Saks Fifth Avenue will also open a full-service department store in the southwestern end of Toronto — at Sherway Gardens mall, which is also owned by Cadillac Fairview.

Cadillac Fairview is the property management arm of the Ontario Teachers Pension Plan, with real estate holdings in several major cities.