Friday 15 November 2019

Landlords offer rent lifeline to Forever 21 to keep stores open

Forever 21 will keep open more than 60 US stores previously set to shut as part of the company's bankruptcy restructuring, after the retailer secured rent concessions from its biggest landlords, according to sources. Photo: Gerry Mooney
Forever 21 will keep open more than 60 US stores previously set to shut as part of the company's bankruptcy restructuring, after the retailer secured rent concessions from its biggest landlords, according to sources. Photo: Gerry Mooney

Eliza Hannon and Lauren Lochner

Forever 21 will keep open more than 60 US stores previously set to shut as part of the company's bankruptcy restructuring, after the retailer secured rent concessions from its biggest landlords, according to sources.

It is an early win for the fast-fashion company after it filed for Chapter 11 protection in September as talks with mall operators about a possible rescue broke down. The company had no plan for reorganisation when it filed, and said it would close at least 178 US stores and dozens more internationally as it worked toward a turnaround.

Forever 21 is now targeting about 111 closures, one of the sources said, asking not to be identified because the negotiations are private. The ultimate number is still in flux, and the final count could change, said the sources.

"Forever 21 was a top-10 tenant for most of the retail REITs we cover, so the landlords have been willing to be flexible about cutting deals," said Jim Sullivan, an equity research analyst at BTIG, who follows the commercial property industry. A representative for the retailer declined to comment.

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One of the landlords offering up rent breaks was regional mall operator Macerich, which hosts 28 Forever 21 stores. Macerich chief executive Tom O'Hern told investors that his company was holding weekly negotiations with Forever 21 regarding stores set to close later this year or in early 2020. "There will be rent concessions on many of the other stores," he said.

Forever 21 cited a disastrous international expansion effort as the primary factor behind its bankruptcy, saying in court documents that it was losing $10m (€9m) a month in Canada, Europe and Asia.

It said moving quickly would be critical to a successful turnaround. The company has offered no updates and has not returned to court since its first-day hearing on September 30. A subsequent hearing set for October 28 was cancelled. It owed $244m to vendors and millions of dollars more to landlords at the time of its Chapter 11 filing.

Bloomberg

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