Image source: Raysonho
Late last year, the largest retail mall owners, Simon Property Group and GGP invested alongside Authentic Brands Group to buy out the assets of troubled teen retailer, Aéropostale. As part of the restructuring, Aeropostale cut the number of stores to 240 from 800, and Simon believes that this is a good investment that can double the number of stores to 500 locations. While this is a good move by Authentic Brands to bring in the two largest retail mall landlords, it is a questionable use of capital given the retail implosion happening to traditional retailers. Some speculate that Simon and GGP invested to maintain their occupancy levels which seems more likely given that maintaining face with the equity market is much more important than any IRR on a relatively small investment for these large owners. It will be interesting to see how the traditional retail mall implosion plays out. Since the announcement of this investment in October, both Simon and GGP stocks are down ~15% and down approximately 40% since their recent highs in July.