Smashing 600 Million Forever 21? "Big Landlord" Shake To Become "New Owner".

Four months after the filing of bankruptcy protection in September last year, the outcome of Forever21 finally came to an end: it is expected to sell its assets at 81 million US dollars (about 570 million yuan).

According to the Wall Street journal, according to the contents of a court document on Sunday, February 2nd, Forever21 has reached an agreement that it will be sold to consortia composed of three companies, namely, owner SimonPropertyGroup (Simon real estate group), BrookfieldPropertyPartnersLP (Brook feld real estate company), and brand management company AuthenticBrandsGroup, at a price of $81 million.

In a statement released on Monday, the company confirmed that the Forever21 will continue to operate.

The composition of the sale assets will include all Forever21 stores and the beauty line RileyRose. Among them, AuthenticBrandsGroup will get the license of some clothing and sports brands of Forever21.

It is worth mentioning that, just a few months ago, AuthenticBrandsGroup just spent a hundred years of luxury BarneysNewYork in New York.

According to the provisions of the law, the sale transaction will finally come into effect in February 11th when it is approved by the bankruptcy court. If there are other competing buyers who want to buy Forever21, they must bid before February 7th.

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The decline and change of Forever21 still make many people sob.

This fast fashion brand, founded in 1984 and headquartered in Losangeles, enjoys almost the same fame as H&M and Zara in China. It has a large number of fans all over the world, and has won a large number of young customers from Abercrombie&Fitch and AmericanEagle.

According to the New York Times, Forever21 in its prime period has more than 4 billion dollars in sales and over 43 thousand employees in hundreds of stores around the world.

Moreover, the inspirational color is that the founder of Forever21 was Zhang Dongwen and Zhang Jinshu (JinSookChang) who emigrated from Korea to the United States in 1981.

A couple of two people have created the fashion brands that are now all over the world from scratch. The family is simply a walking textbook to witness the realization of the American dream.

Prior to last year's bankruptcy petition, Forever21's high light time has been running for nearly 35 years, and operates around 800 stores worldwide, including more than 500 stores in the United States.

It can only be said that the decline of a generation of legends is threatening but not accidental.

The most important reason has also been said to be rotten. That is the strong impact of the "electricity supplier" platform, which has occurred in countless retailers that have fallen or are shrinking.

But this is particularly evident in Forever21. Influenced by the founder's family management style, Forever21 has been walking through the opening mode of shopping centers.

The New York Times has pointed out bluntly that the biggest mistake of Forever21 is in the real estate sector.

Especially before and after the economic crisis in 2008, the company has been expanding its territory. Shops in famous department stores, such as Sears, Saks and Macys, usually have larger rental space, and some stores are in some unprofitable markets.

Forever21's former real estate executive told Bloomberg BusinessWeek (BloombergBusinessweek) that Forever21 founder has always owned a big business as her dream.

However, in recent years, with the continuous decline of passenger flow in physical department stores, coupled with high debt and high cost of rental venues, Forever21 has been deeply under pressure. An internal document from New York Times shows that Forever21 still has seven tenancies in Mervyn 's department store until 2027 or 2028. In the current situation, it really makes people think big.

Moreover, not to mention Forever21 itself, many department stores that provide them with shop space have been struggling for years.

Sears has gone bankrupt and liquidated. Macys has been on the way to close shop in recent years. Today, it is just news that we have to close 125 stores in the next three years.

All days are unpleasant to the naked eye.

Forever21 is not not aware of this. In the past few years, the trend of online shopping has also been trying to keep pace with the trend of sales. It is just that a series of long term leasing orders signed before and after the economic crisis, even earlier, have left them exhausted.

SarahKeeble, director of VERB, a British Retail social media agency, also told the commercial real estate media Bisnow that the failure of Forever21 was not able to remain competitive in a fast fashion industry with novelty, brand effect and easy purchase as the key element of success. In the fast fashion area, the competitiveness is huge. Forever21 can not follow the trend and achieve digital survival.

With the continuous increase of rents, the volume of physical stores is not up to date, and the transformation is not successful. In September last year, Forever21 could only apply for bankruptcy protection and find a way out.

According to Forbes, in 2015, during the heyday of the company, the personal assets of two couples were as high as 5 billion 900 million US dollars. But with the Forever21 entering bankruptcy protection procedures, their total wealth has fallen to $1 billion 600 million, which has shrunk by over $4 billion.

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In fact, the gold masters who helped save Forever21 also had a lot to do.

As one of the largest owners of Forever21, SimonPropertyGroup has 60 years of development history. It is one of the largest REITs (RealEstateInvestmentTrust, real estate investment trusts) companies in the United States. Its investment targets are mainly retail commercial real estate, and is the real leader of this field.

According to S&PGlobal research data, as of June 30, 2019, SimonPropertyGroup has leased 99 stores to Forever21, with a total area of about 1 million 500 thousand square feet (about 139 thousand and 400 square meters).

The lease with Forever21 accounts for 1.4% of the total rental income of SimonPropertyGroup's shopping centers and senior stores.

When Forever21 filed for bankruptcy protection in September last year, among all the landlords of Forever21, SimonPropertyGroup was the most heavily defaulted group, which amounted to $8 million.

Another big landlord was also BrookfieldPropertyPartnersLP, one of the acquirers, and Forever21 contributed 2% of its basic rental income (BaseRent).

Two real estate companies are willing to work together to buy Forever21, which is in trouble.

Because the vacant stores in the shopping center will give consumers a very direct sense of the decline of shopping malls, which will have a negative impact on consumers' visits and make the number of consumers in physical stores less.

CBRE said SimonPropertyGroup and other landlords are working hard to keep the shopping center at a high rate of occupancy. The low occupancy rate and the vacancy of some retailers' stores may allow other retailers to join in the demand for rent reduction.

SimonPropertyGroup has made it clear in the past that it wants to help Forever21 get through the difficulties and that it has 6 billion 800 million dollars in liquidity funds, which will be fully used to maintain the opening of retail outlets in shopping malls.

SimonPropertyGroup so, it is not just shouting slogans. Because this is not SimonPropertyGroup's first attempt to save retailers.

As early as 2016, SimonPropertyGroup joined hands with Reits GeneralGrowthProperties (after GGP was BrookfieldPropertyPartnersLP in 2018) and acquired Aeropostale, a clothing retailer facing young people.

The reason for the takeover was very similar to that for Forever21. All in order to avoid the eventual transfer of trouble to oneself.

At that time, SimonPropertyGroup owned 160 Aeropostale shops, while GGP owned 77. In order to prevent Aeropostale from going bankrupt to be liquidated and finally closed, the two real estate companies made a lot of efforts in the year.

Subsequent years of business adjustment are seen as successful acquisitions in the eyes of data analysts and other market watchers. Because Aeropostale's sales and store numbers have been raised again.

If approved by the court in February 11th, the acquisition of Forever21 is successful, at least 549 of Forever21's stores will continue to operate.

The $81 million acquisition of Forever21 also appears to be "cheap" in the market. But even so, the acquisition still has many adventures. Because today's Forever21, in attracting consumers' attention, online shopping, brand identity and other dimensions of performance, have not performed well.

Moreover, in court records, Forever21 also defaulted on the rental of many other shopping center owners such as Macerich, Vornado and some suppliers' arrears. At last, these debts will probably be transferred to the acquirers.

It can only be said whether Forever21's business predicament can get rid of it and whether it can reappear its former glory in the future is still unpredictable. However, its final destination after filing the bankruptcy petition will soon come to light in the court decision of February 11th.