Mall landlords’ stocks plunge as REIT eyes bankrupt Forever 21

Stocks for Simon, Taubman and Macerich took a nosedive following the news late Friday

Jan.January 29, 2020 02:15 PM
From left: Taubman's Robert Taubman, Macerich's Thomas O'Hern and Simon Property Group's David Simon (Credit: Getty Images) 

From left: Taubman’s Robert Taubman, Macerich’s Thomas O’Hern and Simon Property Group’s David Simon (Credit: Getty Images)

The news that Simon Property Group could buy bankrupt retailer Forever 21 has cost the mall landlord nearly $2 billion in market share and thumped its competitors.

Wall Street reacted negatively Friday’s headline, sending Simon Property’s stock price down nearly 4.5 percent since Bloomberg News reported just before 3 p.m. Friday that the landlord and partner Authentic Brands Group are considering a bid to buy the troubled retailer.

Shortly after the news hit, Simon’s stock nosedived from about $147 per share, and by mid-day Wednesday it appeared to have leveled out at just north of $140 per share. That equates to a loss of about $1.98 billion in market capitalization for the real estate investment trust that started Friday with a market cap of around $45 billion.

A representative for Simon Property Group did not immediately respond to requests for comment.

Piper Sandler analyst Alex Goldfarb, who covers the mall REITs, said investors were likely spooked by new information that could hint at Forever 21 store closures.

“Any potential for further retail closings doesn’t sit well with investors,” he said. “Then there’s the fear that Simon comes in and closes stores and cuts rents.”

It wasn’t just Simon, the largest mall REIT in the United States, that felt the blow. Other owners of top-quality “A” malls suffered the brunt of negative investor sentiment as well.

Macerich saw its stock slide around from around $25 per share the same time Friday afternoon. By Wednesday it had fallen roughly 4.3 percent to $24 per share. And Taubman Centers has seen its price drop around 10 percent from north of $31 per share Friday afternoon to around $28 per share Wednesday.

A spokesperson for Taubman declined to comment and a representative for Macerich did not immediately respond.

The selloff was isolated to the prime mall sector, as REITs overall remained flat.

Goldfarb, however, said he was surprised by Wall Street’s reaction, arguing that a potential deal with Simon would be good news for Forever 21’s landlords. He pointed to Simon and Authentic Brands’s 2016 purchase of a stake in Aeropostale as evidence that the landlord could help stabilize a troubled tenant not only for its properties, but for competitors as well.

“A successful investment for Simon hinges on the retailer being able to perform in the broader universe,” he said. “It can’t just exist at Simon malls.”

Simon Property, along with Brookfield Property Partners, is Forever 21’s largest landlord. Bloomberg reported that Forever 21 had been in talks about selling a stake to its landlords before filing for bankruptcy in September, but the discussions fell apart.

The struggling retailer has been trying to put together a reorganization program, but potential financial partners have reportedly balked at low sales and insistence from the Chang family that founded the chain on maintaining control.

Contact Rich Bockmann at [email protected] or 212-673-5081.

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