Indianapolis-based Simon Property Group Inc. and another mall owner on Sunday submitted a bid to acquire the bankrupt teen-oriented fashion retailer Forever 21 Inc. for $81 million.
The bidding group for the Los Angeles-based chain includes Simon, Bermuda-based Brookfield Property Partners and New York-based Authentic Brands Group, a brand-management firm that recently bought Sports Illustrated.
The deal is the latest evidence of Simon’s willingness to step into an ownership role to rescue mall chains that overexpanded and made other blunders as the internet roiled the fashion-retailing industry.
Simon was part of a group that bought the teen retailer Aeropostale out of bankruptcy in 2016. In the last year, the mall owner also has been aggressively investing in strong-performing chains with growth potential, such as Minnesota-based Life Time, an operator of huge fitness clubs.
The Simon-Brookfield group is serving as the so-called stalking horse bidder in Forever 21’s bankruptcy auction. Other possible bidders have until Feb. 7 to submit superior offers. If the Simon-Brookfield group is outbid, the winning bidder will have to pay it a $4.6 million breakup fee.
Mark Hunter, managing director leading CBRE’s mall management and leasing business in the Americas, said that Simon and others are trying to keep occupancy high at their malls. They don’t want to trigger a clause that lets other retailers at the shopping center ask for a lower rent or eventually get out of a lease. Still, Simon and others remain “strategic” regarding which retailer to buy.
Forever 21 filed for bankruptcy protection in September. If the chain had gone out of business, it would have left a gaping hole to fill in Simon’s properties. Forever 21 was Simon’s seventh-largest tenant as of Sept. 30, with 98 stores occupying 1.5 million square feet of space.
When Forever 21 filed for bankruptcy, it operated about 800 stores, including 500 in the United States. At that time, it said it would close 178 domestic stores and 172 stores elsewhere.
The retailer has four Indianapolis-area stores: at Circle Centre and Castleton Square in Indianapolis, Clay Terrace in Carmel and the Shops at Perry Crossing in Plainfield.
Forever 21 was founded in 1984 and, along with other so-called fast fashion chains like H&M and Zara, rode a wave of popularity among young customers that took off in the mid-1990s.
Their popularity grew during the Great Recession, when shoppers sought fashion bargains.
But over the last year or so, fast fashion has fallen out of style. Young customers are losing interest in throw-away clothes and are more interested in buying eco-friendly products. They’re also gravitating toward rental and online second-hand sites like Thredup, where they see clothes worn again instead of ending up in a landfill.