Forever 21’s biggest landlord could become its new owner

Fast-fashion retailer could be forced to liquidate if no buyer is found

Jan.January 24, 2020 06:08 PM
From left: Authentic Brands Group CEO Jamie Salter, Simon Property Group CEO David Simon, and Forever 21 CEO Do Won Chang (Credit: Getty Images)

From left: Authentic Brands Group CEO Jamie Salter, Simon Property Group CEO David Simon, and Forever 21 CEO Do Won Chang (Credit: Getty Images)

Last summer, struggling fast-fashion retailer Forever 21 reportedly reached out to its landlords to ask for investment in the company. Now, with bankruptcy proceedings well underway, one landlord might be ready to take up that offer.

Simon Property Group is considering a bid to acquire Forever 21 as it teeters on the edge of liquidation, Bloomberg reported. The Indianapolis-based mall owner would team up with Authentic Brands Group in this potential deal to operate the stores and the brand.

The bid could be Forever 21’s last shot at survival. Unable to borrow more money, the company “is turning to you in an effort to continue operating,” it told suppliers in a letter that asked them to ship goods in exchange for 50 percent IOUs, as it continued negotiations with an unnamed potential buyer to be announced in the coming weeks.

The retailer’s attempts to borrow money, or to find buyers, have been hampered not only by poor sales but also by the founders’ insistence on retaining control. Founders Do Won Chang and wife Jin Sook even borrowed $10 million from the trusts of their adult daughters to help keep operations afloat.

Any arrangement for suppliers to ship goods on credit would require the bankruptcy court’s approval.

When Forever 21 declared bankruptcy in October, Simon Property was revealed to be the retailer’s largest creditor among landlords, with more than $8 million in unsecured lease claims outstanding, followed by Brookfield Properties and Macerich.

Simon operates 233 malls and outlets globally, and posted return losses of about 7 percent last year — still relatively strong performance for a mall REIT, amid the industry’s struggles. The company recently invested $280 million in online discount retailer Rue Gilt Groupe to expand their purchasing platforms.

Authentic Brands Group, founded in 2010, recently acquired Barneys for $270 million following the luxury department store’s bankruptcy. The brand management company’s portfolio includes other retailer like Aéropostale and Juicy Couture, as well as well as such celebrities as Muhammad Ali and Marilyn Monroe. [Bloomberg]Kevin Sun

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