A small faction of officials at Forever 21 Inc. has asked its biggest landlords if they’d consider taking a stake in the clothing retailer, as the company’s leadership battles internally about how to turn around the struggling store chain.
Representatives for Simon Property Group and Brookfield Property Partners declined to comment.
Forever 21 operates more than 800 stores in the U.S., Europe, Asia and Latin America, with most in the U.S. Chang and his wife Jin Sook Chang, whose daughters now help run the company, opened their first store in Los Angeles in 1984 and established it as a destination for younger shoppers looking for trendy clothes at affordable prices. But competitors have crowded into the segment, from H&M to Target to new online sellers.
Mall upheaval
Forever 21 is a key tenant to both landlords. Indianapolis-based Simon, a real estate investment trust that is the largest U.S. mall owner, counts Forever 21 as its sixth-largest store tenant outside of department stores, with 99 outlets covering 1.5 million square that account for 1.4 percent of the company’s total base minimum rent in the U.S., according to a filing as of March 31.
For Brookfield Property Partners—a unit of Toronto-based Brookfield Asset Management Inc.—Forever 21 accounted for 2 percent of its minimum rents, according to a filing as of March 31. Brookfield last year bought GGP Inc., the second-largest U.S. mall operator.
“Mall REIT exposure to Forever 21 is definitely bigger than most department stores, which pay very little base rent per square foot,” said Bloomberg Intelligence analyst Lindsay Dutch.
Forever 21’s management, while fractured, has been busy over the past few weeks, holding discussions with lenders including Apollo Global Management LLC about potential bankruptcy financing. It has added investment bank Lazard Ltd. and law firm Kirkland & Ellis to its roster of advisers. It had tapped Latham & Watkins, its longtime legal counsel, for restructuring advice before adding Kirkland & Ellis. Latham & Watkins didn’t comment.
The company is trying to avoid falling victim to the retail shakeout that destroyed dominant chains such as Borders Group and Sports Authority as consumers defected to online merchants. Many of the failed stores had been bought out by private equity firms that loaded the companies up with debt, leaving them unable to make investments needed to compete with rivals such as Amazon.com.
Reporting by Lauren Coleman-Lochner, Eliza Ronalds-Hannon and Gillian Tan with assistance from Scott Deveau, Boris Korby and Kiel Porter.