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Simon (SPG), General Growth (GGP) Bid to Save Aeropostale

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Per a Wall Street Journal report, mall owners – Simon Property Group Inc. (SPG - Free Report) and General Growth Properties, Inc. – have collaborated with a $243-million bid to rescue the retail chain, Aeropostale, which filed for bankruptcy in May.

In fact, these two major landlords of the bankrupt Aeropostale have joined hands with licensing firm, Authentic Brands Group as well as liquidators – Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC – to keep this teen clothing retail chain afloat. However, it will comparatively possess a lower footprint of 229 stores than the 800 stores it had prior to bankruptcy. However, lender Sycamore Partners also made an offer by calling off its $150 million loan made to Aeropostale.

No doubt, this is a notable move for Aeropostale which has struggled with cutthroat competition in the retail market and growing rivalry from online channels. It also seems a strategic plan for the mall landlords – Simon Property and General Growth – combating with the trimming and bankrupt retailers.

Though upbeat consumer confidence and improving economy have infused optimism for the retail market, mall traffics continue to suffer amid rapid shift in customers’ shopping preferences and patterns with online purchases growing by leaps and bounds. These have made the retailers reconsider their footprint and eventually opt for store closures in recent times. (Read: Retail REITs Dip on Macy's Store Closure Announcement)

Grappling with such challenges, mall landlords have decided to go to the mattresses. They are making concerted efforts in turning their boring retail hubs into swanky entertainment zones, digitizing their malls and turning into distribution hubs.

Finally, the latest move by Simon and General Growth seems prudent as it would help the retail landlords retain the 229 stores in the top-performing malls and rather avoid bulk store closures resulting from the liquidation move. Also, there would be possibilities to lease the underperforming stores to better-quality tenants.

Currently, both Simon Property and General Growth carry a Zacks Rank #3 (Hold).

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