Simon Property Pens $1 Billion Deal With JCPenney And Moves Forward With Shein Transaction

In 2016, retail powerhouse Simon Property Group's acquisition of fashion retailer Aéropostale during its bankruptcy was viewed by the market as a desperate move to prevent more empty storefronts in its portfolio.

Simon's extensive ownership of retailers is notable, going beyond the typical ownership level seen in real estate companies. The collaboration with Authentic Brands Group and General Growth Properties in the Aéropostale acquisition was a pivotal step to mitigate the closures of stores in its malls.

What the firm is doing now: Fast-forward seven years, Simon, in a joint venture with Authentic Brands Group known as SPARC, has expanded its retail brand holdings significantly. This move has been praised for its vision in investing in struggling retailers, yet criticized for maintaining failing brands to avoid vacancies.

A ground-breaking deal: Recently, Simon has taken a bold step, investing $1 billion in the struggling department store chain JCPenney, a venture with Brookfield, aimed at revitalizing the financially troubled chain.

In a surprising move within the retail sector, Simon sold a third of its retailer portfolio to the popular Chinese Generation Z fashion brand, Shein. This strategic move aims to enhance e-commerce sales for Simon's brands and marks Shein's venture into physical locations within Simon malls, hinting at a broader rollout in the future. Simon, with its vast real estate portfolio, is well-positioned for potential nationwide store rollouts by Shein in the future. 

What the joint venture has invested in: SPARC Group, born from the Aéropostale acquisition, continued to acquire brands like Nautica, Forever 21, Lucky Brand, Brooks Brothers, Eddie Bauer, and Reebok. The portfolio encompasses approximately 1,600 stores, presenting a mix of potential for expansion and outdated retail names.

What’s next for Simon Property: The challenge for large mall portfolio owners like Simon lies in the potential loss of numerous stores if a legacy retailer shuts down, akin to losing an entire mall at once. Thus, maintaining struggling retailers within malls becomes a strategic imperative to prevent significant gaps in the estate.