When the Landlord Bought the Tenants: How a Mall Giant Became a Retailer

The pandemic spring of 2020 was supposed to be the death knell for the American department store. J.C. Penney, a 118-year-old anchor of middle-class retail, filed for Chapter 11 in May. Brooks Brothers, the clothier that dressed presidents since 1818, followed in July. Forever 21 and Lucky Brand Jeans had already collapsed the year before. Mall owners watched anchor spaces go dark, foot traffic evaporate, and the whole model of the regional shopping center teeter.

Then the landlord did something unprecedented. Simon Property Group, the largest mall operator in the United States, reached into its own pockets and bought the tenants.

The Crisis at the Gate

By early 2020, Simon's portfolio spanned more than 200 properties and 240 million square feet. Its business model was straightforward: lease space to retailers, collect rent, manage the common areas. But the model had a fatal dependency. When a major anchor like J.C. Penney or a traffic driver like Forever 21 failed, the ripple effect was immediate — co-tenancy clauses triggered, smaller stores demanded rent relief, and the mall's appeal collapsed.

David Simon, the company's chairman and CEO, saw the math clearly. Losing J.C. Penney alone would leave massive vacancies across dozens of Simon malls. The cost of re-tenanting those boxes, if they could be re-tenanted at all, would run into the billions. The alternative was to step outside the landlord role entirely.

The Unlikely Partnership

Simon found a partner in Authentic Brands Group (ABG), a brand-management firm that specialized in acquiring intellectual property and licensing it globally. ABG had no real estate. Simon had no retail-operating expertise. Together, they formed a joint venture — often joined by Brookfield Asset Management — that could buy distressed brands out of bankruptcy, shrink their store fleets to the most profitable locations, and pour resources into e-commerce.

The first test came in February 2020, just before the pandemic locked down the country. The venture acquired Forever 21 for roughly $81 million, saving 350 stores and 25,000 jobs. The strategy was blunt: close the weak locations, invest heavily in the website, and use Simon's malls as fulfillment hubs and showrooms.

The Rescue Missions

Then came the pandemic summer. In August 2020, the partnership bought Brooks Brothers for $325 million and Lucky Brand Jeans for $140 million. Both brands had been drifting for years; the lockdown merely finished them. Simon and ABG moved fast, installing new management, rationalizing inventory, and integrating the brands into Simon's nascent omnichannel platform.

The boldest move arrived in December. Simon and Brookfield acquired J.C. Penney for $1.75 billion — a price that included assuming the retailer's liabilities and funding its emergence from bankruptcy. It was a defensive masterstroke. Penney operated in more than 60 Simon malls. Its departure would have triggered a cascade of co-tenancy failures and rent abatements. By owning the tenant, Simon turned a liability into an asset it could restructure on its own terms.

This is one episode in a much longer story. For the full account of the history of Simon Property Group, read “Simon Property Group Inc” by Philip Silva on MixCache.com.