Three years ago, Simon Property Group teamed up with fellow mall owner General Growth Properties to resurrect the then-recently bankrupted Aeropostale. The move not only helped the brand exit from bankruptcy just four months later but also allowed it reopen a fleet of 500 stores in a matter of eight months.
At the time, landlords’ purchase of stakes in their own tenants was virtually unheard of, but with a growing list of retail bankruptcies and liquidations in recent years, it’s no surprise some mall owners are looking for ways to mitigate vacancies within their properties.
In the company’s second-quarter earnings call, Simon Property Group CEO David Simon said he “wouldn’t rule out” the possibility of investing in more retailers in order to rescue them from going out of business.
“I think it’s very possible. We’re going to be very smart about it,” he said, citing the firm’s $6.8 billion in liquidity. “We’re certainly as good as the private equity guys when it comes to retail investment.”
The company’s potential stake in struggling chains comes at a time when the growing convenience of e-commerce and a shift toward experiential spending have sent traditional brick-and-mortar retailers to bankruptcy court. Payless ShoeSource, Sears and Charlotte Russe were among the bigger names to shutter stores this year.
Simon also brought up the company’s partnership with Authentic Brands Group, which was also among the investors to submit the winning $243 million bid that helped keep Aeropostale afloat. (ABG also bought the Nine West footwear brand out of bankruptcy last year and helped revive the Juicy Couture and Nautica labels.) The exec said that if Simon Property Group were to invest in beleaguered retailers, it’s “not sure we would do it alone, but with someone like ABG,” with which it has historically had success.
“We love being partners with Authentic Brands Group, and we’ll work together on other distressed situations — and let’s face it, there are some out there,” Simon added. “We’re only going to buy into companies that we think have brands and that have the volume that is worth doing it. . . . That’s the majority difference. We also have the ability to underwrite the business a lot better than we could have.”
According to global research firm Coresight Research, even more store closures are expected this year ahead of the back-to-school and holiday shopping seasons. It reported that retailers across the United States have announced 7,062 store closures so far in 2019, already exceeding the 5,864 closures for all of 2018. This year’s tally, it said, could even top 12,000 by December, which would set a new record for the industry.
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