RETAIL: Simon Property CEO says more bankruptcies
Retailers are filing bankruptcy at record-high rates, despite strong consumer spending creating a lifted U.S. economy; however, the pace of closures slowed from 2017, when more than 20 retailers, including Toys R Us, Hhgregg and Gymboree, closed their doors.
Approximately 16 U.S. retailers have filed for bankruptcy or announced liquidations in 2018 (as of December 2018). Well-known David’s Bridal filed its bankruptcy in November. It recently emerged from its Chapter 11 this month. And thus far this year, six retailers filed bankruptcy, FullBeauty Brands, Charlotte Russe, Gymboree, Shopko, Innovative Mattress Solutions and Beauty Brands.
The biggest bankruptcy of 2018 was Sears. The department chain’s future is still uncertain heading into 2019, as the company’s chairman, Eddie Lampert, is in the process of trying to buy back Sears’ remaining stores.
Today, Sears Holdings Corp., the name of the company now, and its creditors are expected to appear in court to avoid liquidation. Sears accepted Lampert’s $5.2 billion offer to buy the retailer’s assets at a bankruptcy auction last month. But Lampert’s proposal, made through his hedge fund ESL Investments, still needs the endorsement of the U.S. Bankruptcy Court for the Southern District of New York, and it has run into opposition from creditors skeptical that Sears will be any more successful after exiting bankruptcy, according to media outlets.
Although the bankruptcies dropped in 2018 and big-named retailers such as Sears are fighting to keep their properties occupied, the filings and store closures are still hurting employees and mall owners.
Mall landlord Simon Property Group CEO David Simon said, “There are some retailers out there that we’re nervous about. I mean, so far in the first quarter bankruptcies are trending lower than they were in 2017 and 2018. However, there’s some rumored things out there that could ultimately end up being at similar 2017 and 2018. 2018, as we said, and as we look and anticipated 2018, we thought it would be less than 2017. We ended up being right there, but I do think there will be more bankruptcies to come in 2019.”
Simon continued, “It’s a little bit out of our control when we get the space and then to do a lease, it takes time and even though as much as we anticipated, we just take time to lease the space. So, I mean, we have our work cut out. We are concerned about a few retailers that should shake out in the first quarter.”
On Friday, when Simon reported fourth-quarter earnings, the “redevelopment” of its malls dominated the earnings call. In 2018, it opened two new shopping destinations; delivered five significant property transformations and expansions; and started construction on several redevelopments of former department store spaces.
