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LOS ANGELES—Forever 21's acquisition by two mall REITs and Authentic Brands Group has been finalized, weeks after the buying group and bankrupt retailer announced they had struck a deal.
Simon Property Group, Brookfield Property Partners and Authentic Brands Group are the buyers with ABG and Simon each owning 37.5%, and Brookfield owning 25% of the intellectual property and operating businesses.
This is not the first time Simon Property Group has rescued a failing brand. In 2016 it and General Growth Properties acquired the distressed teen clothing retailer Aeropostale. The new owners of Forever 21 still see potential in the brand and hope to follow a similar path as Aeropostale's.
"Forever 21 is a powerful retail brand with incredible consumer reach and a wealth of untapped potential," Jamie Salter, Chairman and CEO of ABG, says in prepared remarks.
Forever 21 stores will continue to operate across the United States and international territories. The brand's new owners will also continue to maintain Forever 21's headquarters in Los Angeles, Calif., as well as its e-commerce business.
Forever 21 is working with various landlords to continue store operations in key regions. Forever 21 will convert its current, owned store operations in Central America, South America, Mexico, the Philippines, and the Caribbean to a licensed partnership model. The new ownership group hopes to expand Forever 21 across key territories, including South America, Western and Eastern Europe, China, Southeast Asia, Middle East, and India.
Forever 21's acquisition marks a busy period of time for Simon, which is also bidding to acquire a majority stake in its rival retail REIT Taubman Centers. Both deals could turn out to be inflection points for the retail industry, depending on what Simon does with its new assets.
Its bid for the REIT, according to Aleida Martinez-Molina a bankruptcy and insolvency attorney at Weiss Serota Helfman Cole & Bierman, could well reflect a perceived opportunity by this industry stakeholder in a quickly changing marketplace. "The nation's largest mall operator may be positioned to facilitate the transition of traditional malls from almost exclusive retail shopping venues to places with more "experience/entertainment" tenants," she tells GlobeSt.com.
Martinez-Molina also noted that the Simon Property Group-led buying consortium was the only bidder in Forever 21's chapter 11 bankruptcy sale. "The fact that it purchased one of its largest (in number of stores nationwide) tenants may also reflect a "Plan B" mindset of control and opportunity to change this industry," she says.
There are also practical considerations, especially behind the Forever 21 transaction, says Patrick Dinardo, a partner at Sullivan & Worcester. "I think Simon really wanted Forever 21 to stay in business in order to avoid the large, dark spaces it would have in its malls if the retailer went out completely," he tells GlobeSt.com.
"There's nothing more depressing than walking around a mall filled with nothing but empty spaces."
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
