It started in April. Retailers, pummeled by a health crisis that forced an unexpected wave of store closures, started looking for creative ways to tighten their belts. On the list of costs retailers were struggling to address: rent. 

Many of those talks were unsuccessful, and the failure to find ways to cope with pandemic-driven pressures (on top of years of pressure on the industry) tipped a wave of retailers over the edge into bankruptcy — 26 and counting in 2020 at press time. 

Mall developers, in particular Simon Property Group and fellow commercial property owner Brookfield, have stepped up in the past to acquire distressed retailers in order to salvage their own business. Most notably, a consortium of landlords that included both organizations worked with Authentic Brands Group to purchase teen apparel retailer Aeropostale in 2016.

In February, Simon partnered again with ABG and Brookfield and bought fast-fashion retailer Forever 21 through a stalking horse bid in bankruptcy. In July, Simon and ABG submitted a $305 million stalking horse bid to acquire bankrupt menswear retailer Brooks Brothers. The same day Brooks Brothers asked a court for approval of the deal in August, Simon and ABG purchased Lucky Brand through a 50-50 partnership venture called Sparc — sealing a deal that accompanied the initial Chapter 11 filling. Simon and Brookfield are also reportedly interested in acquiring bankrupt department store J.C. Penney.

At press time the ultimate impacts these purchases and proposed bids will have on the mall landscape and retail writ large is unknown, but could it herald a new era in landlord/tenant relations and mall operations? Retail Dive Senior Reporters Daphne Howland and Ben Unglesbee weigh in on this episode of The Backroom. 

Resource links:

• To pay or not to pay: Retailers are making tough decisions on rent and other bills
• When the mall owns the retailer
• And the malls come tumbling down
• Retail REITs may not recover until 2022, S&P says