More and more, real estate trusts that own shopping malls are taking over distressed retailers. Is this good…and will it work?
This new trend — call it REITailing, of course — first surfaced a few years back when Simon Properties and Brookfield Properties’ General Growth Properties purchased the apparel chain Aeropostale in 2016. Forever 21 became the next acquisition. Since then the two, sometimes with a third party that might handle the actual merchandising part of the business, have been in the middle of deals for such retailers as Brooks Brothers, Ascena and now JCPenney.
On the down side, for the mall operators, is the possibility that these are just bad investments, buying up troubled retailers who no matter who owns them don’t have the positions and strategies in place to be successful.
For the retail business it’s a mixed bag. Yes, they get to stay alive and out of the hands of private equity owners who have proven to be singularly rotten at running retail. But they still inherit a financial overlord whose interests lie in something other than retail. The current REITailing movement is still too new to judge. History would suggest it will have a tough time succeeding. But history these days may be a poor indicator of what will happen and what won’t as we enter very unchartered territory.
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