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Mall Owners Form Consortium to Save Aeropostale From Bankruptcy Liquidation

Simon Malls and General Growth Are The Retailer's Landlord in a Dozen NJ Malls
Aeropostale
Aeropostale Aeropostale

EDISON, NJ–An alliance led by General Growth Properties Inc. and another mall owner, Simon Property Group Inc., won an auction on August 30 for the assets of ailing teen apparel retailer Aeropostale Inc., saving it from bankruptcy liquidation.

The price is $243.3 million and the consortium will keep 229 of the 800 Aeropostale stores in the chain, or nearly 30%, open for business.

“We believe Aeropostale will remain a viable entity going forward,” said Sandeep Lakhmi Mathrani, General Growth's chief executive officer nearly a month before the deal. But “its footprint may be smaller than it is today.”

But interestingly, before General Growth ventured into the retail trade by purchasing Aero, which it rents space to in four Garden State malls, Mathrani on Aug. 2 said: “… We are in the retail real estate business.”

Aero filed for bankruptcy in May and it looked like it would be winding down business for good prior to the recent announcement of the deal with the buying group, which plans to keep a fourth of Aero's stores open.

“The Successful Bid contemplates a going-concern sale of the Debtors’ businesses with a store base of at least 229 stores,” reads a court document filed on September 2.

But the “$243.3 million purchase price, [is also] subject to certain adjustments, and the assumption of certain liabilities.”

A hearing to finalize the sale is scheduled for September 12, according to court papers.

Of the 35 Aeropostale stores in the Garden State, General Growth operates four malls where it rents Aero space:

  • Bridgewater Commons
  • Woodbridge Center (Factory Store)
  • Paramus Park
  • Willowbrook Mall in Wayne

Simon holds double the amount of NJ store leases with Aero:

  • Menlo Park Mall in Edison
  • The Mill at Jersey Gardens in Elizabeth
  • Jackson Premium Outlets in Jackson (Factory Store)
  • Newport Center in Jersey City (Factory Store)
  • Quakerbridge Mall in Lawrenceville
  • Livingston Mall in Livingston (Factory Store)
  • Jersey Shore Premium Outlets in Tinton Falls (Factory Store)
  • Ocean County Mall in Toms River

New York-based Aeropostale says the consortium will also continue to manage its e-commerce business and international licensing affairs.

It adds: “Aeropostale looks forward to closing the sale and emerging from bankruptcy with new ownership as a financially stronger company positioned to compete and succeed in an evolving retail landscape.”

The number of closures by large retail chains, annually, is greater than it’s been in the last six years, according to Cushman & Wakefield research.

While specifics of the deal have not been disclosed, it gives Simon and General Growth more control, and likely saves many Aero's from pulling out of some of the top-performing malls simultaneously.

Aero had been at odds with private equity firm Sycamore Partners over accusations the lender forced it into Chapter 11 bankruptcy so that it could then buy it cheap. But the bankruptcy judge did not allow that claim.

“Representatives for key constituents of the Debtors, including Sycamore Partners…and the Official Committee of Unsecured Creditors, consented to the selection of the Successful Bid by the Debtors,” says court papers.

“We are pleased with the outcome of the Aeropostale Inc. bankruptcy auction, which will result in the repayment of our debt while enabling the company to keep open more than 200 stores, preserve thousands of jobs and continue to serve customers,” stated Sycamore.