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Forever 21 reaches deal to sell its retail business for $81 million

People enter a Forever 21 store at a shopping mall in Montebello, California on September 30, 2019 a day after the fashion retailer filed for Chapter 11 bankruptcy protection.

Frederic J. Brown | AFP | Getty Images

Forever 21 has reached an $81 million deal to sell its retail business to a group that includes Simon Property Group, Brookfield Property Partners and Authentic Brands.

Forever 21 said in a bankruptcy court filing it is seeking approval to name the three as the lead, stalking-horse bidders in an auction.

Rival bidders have until Friday to make any counteroffers, the filing said. If other bids are made, an auction will be held on Feb. 10. Forever 21 is planning to seek approval of the sale by Feb. 11.

Forever 21 filed for Chapter 11 bankruptcy protection in September. The mall-based apparel chain, which caters to younger customers, got into trouble by expanding too quickly inside and outside the United States. Forever 21 has shuttered more than 100 locations since its bankruptcy filing. It still had more than 800 stores globally in September.

The fear for many of America’s mall owners has been that a liquidation of Forever 21 would leave them with too much vacant space. Simon and Brookfield are two of Forever 21’s biggest landlords.

While not common for a real estate company to acquire a retailer, the strategy has been successfully used before.

In 2016, Simon and mall owner General Growth Properties, which is now owned by Brookfield Property Partners, teamed up to rescue embattled teen apparel retailer Aeropostale. The two were part of a group that ultimately won an auction to buy the Aeropostale brand out of bankruptcy court, salvaging its real estate. At the time, Simon had about 160 Aeropostale stores in its portfolio, while GGP had 77. A liquidation would have left them with more than 200 empty shops.

Simon’s malls have nearly 100 Forever 21 stores.

When asked in July about acquiring or investing in more of its own tenants, Simon Property CEO David Simon said: “We’re certainly as good as the private-equity guys when it comes to retail investment. … And so, I wouldn’t rule it out.”

Authentic Brands in late 2019 bought the rights in bankruptcy court to the Barneys New York brand name. Its retail portfolio includes Nine West and Nautica.

Read the Forever 21 court documents here.

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