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Aeropostale snags rent deal and saves 171 stores

By
Lisa Fickenscher
Published Sep. 15, 2016, 10:45 p.m. ET

Aeropostale just got a sweeter deal.

The bankrupt teen retailer that was left for dead — and expected at first to shutter all 720 US stores — will now keep 400 of those stores open thanks to an 11th-hour deal with several mall owners.

A bankruptcy court judge on Monday agreed to a plan that would have saved 229 stores — but late Thursday an undisclosed number of mall operators agreed to cut the rents for another 171 stores.

The rent cut allowed the additional 171 stores to remain open — saving roughly 5,300 jobs.

Earlier, in a very unusual deal, two mall operators — Simon Properties and General Growth Properties — joined licensor Authentic Brands Group in buying the bankrupt chain for $243 million.

Under that deal, 229 stores, all in Simon and GGP malls, would have been saved. That deal rescued 7,000 jobs, sources said.

Retail experts said it was the first time a US mall operator has stepped in to buy a retail chain.

Perhaps the move is not surprising. Malls face a troubling slowdown in customer traffic and their retail tenants are struggling to keep their doors open — even with deeply discounted products.

Anchor stores, such as Macy’s, which is closing 100 stores this year, are also pulling back, leaving large chunks of mall space up for grabs.

To be sure, the majority of Simon and GGP malls are considered elite shopping centers with higher occupancy rates and thus less at risk from store closings.

The first-of-its-kind deal has sparked lots of chatter in retail circles.

“This is about keeping their finger on the dam,” said one real estate expert, pointing to the number of store closures and the likelihood of more to come as numerous chains are “chugging along on life support.”

Authentic Brands Chief Executive Jamie Salter said he was able to increase the number of saved Aeropostale stores to 400 after other landlords “cooperated with our business plan.”

“There is nothing wrong with Aeropostale, but you have to get the rents and the overhead under control.

“This is a new way of thinking about retail,” he said, adding that he had discussed a similar deal with Simon Properties a year ago with another bankrupt chain, though it fell apart.

“We had a template figured out, so when this situation with Aeropostale came up, I approached them again.”

Salter, who owns such brands as Juicy Couture and Jones New York, plus the rights to the Marilyn Monroe and Muhammad Ali brands, said some of the current Aeropostale management team will remain.

Ironically, under the 11th-hour deal, the added mall owners will appear to be helping their rivals by allowing Aeropostale to profit — money that will flow up to Simon and GGP.

“The entity is financially secure and well capitalized, and we are very pleased that thousands of jobs will be preserved,” said GGP CEO Sandeep Mathrani.