The Financial Times reports on the new strategy being used by mall owner Simon Property Group, which finds itself challenged by new retailing realities.
"Simon Property Group became one of America's largest shopping mall landlords under Mel and Herb Simon, brothers and co-founders. Under Mel's son, David, it is also becoming a sizeable tenant. Through a series of unconventional deals that show how an unfolding crisis in bricks and mortar retail is transforming old business models, the real estate company is helping to salvage big names in the US clothing sector.
"A Delaware judge on Friday gave the green light to Simon to become part-owner of Brooks Brothers, the two centuries-old menswear retailer that was tipped into bankruptcy last month by the coronavirus pandemic. Just days earlier, the property group - together with its BlackRock-controlled partner Authentic Brands, a licensing specialist that owns Sports Illustrated magazine - was given the go-ahead to buy Lucky Brand, the California-based jeans retailer, out of Chapter 11.
"Setting out the rationale last week, David Simon, chairman and chief executive, said: 'There's just nothing out there that says you can't make smart investments outside of your core businesses.' But with the occupancy rate of Simon properties at its lowest level in a decade, the worry on Wall Street is that keeping retailers afloat with its own cash is a desperate attempt to prevent bigger areas of the malls from lying empty."
You can read the story here.
- KC's View:
One of the points that Steve Dennis, retail expert and our guest on the Retail Tomorrow Podcast this week, makes in our conversation is that this may be less about strategy and more about a tactical effort to protect the company from other defections; he says that a lot of mall contracts allow smaller retailers to end their leases early if an anchor tenant closes.
I keep wondering if the current Simon generation of leadership may be making the same mistake as founder Mel Simon, who back in the seventies decided to expand into the movie production business - a move that generally is seen as not very smart, resulting in the overall loss of millions of dollars. (The movie business is much like the wine business - if you want to make a little money, you have to start with a lot of money…)
Though, to be fair Mel Simon did help underwrite some titles you may remember, like Porky's, Love At First Bite, Zorro the Gay Blade, and The Stunt Man. (He also produced Somebody Killed Her Husband, a terrible and little seen move with Jeff Bridges and Farrah Fawcett in her first post-"Charlie's Angels" role. I know a little about this movie, since it was the film on which I worked as part of Farrah's security detail … allowing me to legitimately say that I once was Farrah Fawcett's bodyguard. A small credit, but a fun one.)