A Template — or Not? Consortium Buys Troubled Aéropostale

By Scott Baltic, Contributing Editor

Aeropostale at Promenade Mall, Thornhill, Ontario (now closed)

New York—A consortium of shopping center giants General Growth Properties and Simon Property Group, along with Authentic Brands Group, has completed its $243 million acquisition of teen apparel and accessories brand Aéropostale.

By all accounts, the transaction saved Aéropostale, which filed for bankruptcy on May 4, from being sold for its assets. As things stand now, the chain will go forward with more than 400 stores in the United States and Canada and about 300 retail doors across Latin America, Europe, the Middle East and Southeast Asia.

As of the bankruptcy filing, Simon was a landlord for about 160 Aéropostale stores and GGP was also an Aéropostale landlord. Neither company would provide additional information.

“Aéropostale has significant brand equity, and the go-forward portfolio of stores generates more than $1 billion in global retail sales, over $800 million of which is from the U.S.,” Sandeep Mathrani, CEO of GGP, said in a prepared statement. “The entity is financially secure and well capitalized, and we are very pleased that thousands of jobs will be preserved.”

Authentic Brands Group, a New York City-based brand development company, has in its stable such brands as Marilyn Monroe®, Elvis Presley®, Muhammad Ali®, Shaquille O’Neal®, Michael Jackson® *managed brand*, Juicy Couture®, Jones New York®, Frederick’s of Hollywood®, Adrienne Vittadini® and numerous others.

In another development, as reported by the New York Business Journal, various mall landlords have agreed to rent reductions for 171 Aéropostale stores, which will allow the chain to keep a total of 400 stores open in the U.S. and Canada. An earlier estimate had been that only 229 stores could be saved.

“This could be a model for future restructurings in the years ahead,” Ray Schrock, a lawyer for Aéropostale, told U.S. Bankruptcy Judge Sean Lane, according to a Bloomberg story a week ago. The judge reportedly found compelling the argument by Aéropostale’s lawyers that the sale would save at least 7,000 jobs.

This transaction appears to be the first such involving a retail chain and one or more mall owners, Michael Lagazo, San Diego-based senior advisor/retail for SVN’s Asset Advisory Group, told Commercial Property Executive.

On one hand, “these are top-tier mall owners, with the highest mall occupancies,” so in a sense there’s little risk for them, he explained, but the flip side is that they still have to solve Aéropostale’s deeper problems, beyond the retailer’s short-term liquidity.

Only time will tell whether this is a template for other retailers and mall owners, Lagazo said. He emphasized, however, that “There are only so many parties that can carry off” a deal like this, that is, probably only a handful of top mall owners have the financial resources to try this strategy anyway.

(In May, CPE interviewed Melina Cordero, CBRE’s head of retail research for the Americas, regarding retailer issues in a year in which not only Aéropostale, but chains like Gap and Abercrombie & Fitch are struggling with store closures.)

Image via Wikimedia Commons, user Raysonho