August 01, 2019

Large Mall Owner May Invest in More Retailers

Simon Property Group CEO Tells Analysts It Has the Cash to Help Troubled Chains Stay in Business

Simon Property Group, one of the nation’s largest owners of retail property ranging from shopping centers to outlets and malls, said it’s ready to come to the rescue of more distressed retail tenants to maintain its properties. So instead of serving as just a landlord, Simon is ready to be an investor to more store owners.

The real estate investment trust, flush with more than $6.8 billion in liquidity and coming off fresh experience in swooping in to save a retailer, could soon find itself again coming to the rescue of distressed merchants. Chief Executive David Simon told analysts Wednesday the real estate investment trust is willing and able to fix what’s wrong with certain retailers.

“We certainly have the ability to help beyond what you might do on the leases [and] become an investor in a distressed situation,” he said on the REIT’s quarterly conference call. “We have the ability … to look at becoming more than just a real estate player, but a buyer of these brands.”

Simon joins Vornado Realty Trust, one of New York City’s biggest commercial landlords, in explaining to investors this week how they are taking steps to manage their properties as retailers struggle with declining foot traffic amid increased online shopping.

Executives throughout the shopping center industry say the rise of online shopping can be managed, but it will take innovation on the parts of both their tenants and the property owners themselves. Vornado gave as an example how it’s replacing some Manhattan retail space rented by a struggling fast-casual clothing chain with a supermarket.

In 2016, Simon teamed with what was then General Growth Properties, now part of investment giant Brookfield, to bail Aeropostale, the casual-clothes retailer popular with teens, out of bankruptcy. The move saved 229 stores from going dark. Other investors included Authentic Brands Group, and liquidators Hilco and Gordon Brothers.

“It’s possible” Simon Property and partners would do it again, according to the executive. “We’re going to be smart about it,” he said. “We’re only going to buy into companies that we think have brands and that have the volume that is worth doing it.”

He said Simon Property has a strong partnership with Authentic Brands Group, which holds rights to merchandise associated with pro basketball legend Shaquille O’Neal as well as fashion brands Nautica and Juicy Couture.

And this month, Simon Property launched a beta test of an online merchandiser called Shop Premium Outlets, a platform aimed at helping its tenants boost traffic and sales across all channels.

Noting too that Simon Property has the “ability to underwrite the business,” Simon said the Aeropostale experience also gave the company insight into what rents should be in a workout scenario.

“Our team can basically rapidly run through any kind of investment or retail scenario and get to the bottom of what the right fix is,” he said.

The team might be at it again with Forever 21, another teen apparel retailer in trouble. Last month, Bloomberg reported that the merchant was asking its biggest landlords to consider investing in the company. And yes, Simon Property is one of those landlords, though Simon didn’t comment on a deal Wednesday.