Simon Property Group, Authentic Brands bid $305M for Brooks Brothers

Dive Brief:

Mall owner Simon Property Group and brand conglomerate Authentic Brands Group (ABG) have submitted a $305 million stalking horse bid to acquire Brooks Brothers, according to documents filed by the apparel brand in the U.S. Bankruptcy Court for the District of Delaware. That is now the baseline for any competing offers.
A court hearing to consider the offer and further bidding procedures is scheduled for Aug. 3, according to a press release from Brooks Brothers and Sparc, a "retail operator" formed by Simon and ABG. If Brooks Brothers does accept another offer, Sparc would be entitled to a breakup fee of $9.15 million, according to the court document.
Brooks Brothers, which filed for bankruptcy on July 8, is requesting an Aug. 5 deadline for competing offers and an Aug. 11 hearing to approve the sale, per the release.

Dive Insight:

Retailers and landlords often find themselves in contention, and the pandemic has pitted one against the other over unpaid rent on stores ringing up little to no sales. Increasingly, though, retailers are getting owned by their landlords — literally.

That is, mall developers, notably Simon Property Group and fellow commercial property owner Brookfield, have stepped up more than once to acquire distressed retailers in order to salvage their business and the ability to pay. In February this year, partnering with Authentic Brands and Brookfield, and again through a stalking horse bid in bankruptcy court, Simon bought fast-fashion retailer Forever 21. Before that, in 2016, a consortium of landlords including Simon joined ABG in acquiring apparel retailer Aeropostale. Simon and Brookfield are also reportedly interested in acquiring bankrupt department store J.C. Penney.

It's unclear how far shoring up tenants in order to salvage their rent will go in saving malls, however. Mall vacancy rates were rising before the pandemic, which is seen as accelerating the closure of the anchor retailers that are critical for mall traffic and determine leasing arrangements for other tenants. While malls are now reopening after the forced closures earlier this year, consumers remain wary of shopping indoors as the disease outbreak endures and even worsens in some areas.

Moreoever, the property owners can't buy all the retailers, so instead are heading to court to collect rent. Simon Property Group and Brookfield have taken the likes of Gap to court over unpaid rent. Nordstrom last month warned its landlords not to expect full rent payments for the rest of the year. Mall owner CBL is said to be prepping a bankruptcy of its own as the situation takes a toll.