10.24.16: Simon and GGP Rescue Aeropostale; Is This the Future of Retailing?

A consortium led by developers Simon Property Group (SPG) and General Growth Properties (GGP) won an auction for the assets of Aeropostale in September. The group plans to keep open 299 of the bankrupt retailer’s stores. Aeropostale was facing liquidation if the SPG/GGP team did not step in with a winning bid. Liquidation would have created vacant stores in hundreds of shopping malls, many of them owned by SPG and GGP.

“Why would developers want to get involved in something like this? They’ve never done it before,” says Howard Davidowitz, chairman of Davidowitz & Associates, Inc., a national retail consulting and investment banking firm. “This is not their business, but they see the world crumbling around them.”

In fact, this is the first time in modern retailing that a property owner made such a dramatic move to save a retailer, and it is indicative of the pressure retail property owners face in maintaining high occupancy at their properties. The deal raises questions about whether retail property owners and mall landlords, in particular, will play a greater role in helping tenants survive in a highly competitive retail environment. Retail property owners may be forced to participate in additional rescues as they depend on specialty retailers like Aeropostale to fill their mall spaces and pay the handsome associated rents.

The SGP/GGP strategy “is about protecting their mall space and preventing vacancies and losses,” says Melina Cordero, head of retail research for CBRE. “When a retailer files for bankruptcy, the resolution process is often long and landlords don’t often have a say in what happens to a space.”



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