And then there is more specific feedback. In response to “Sycamore Partners is a B.E.A.S.T. Part I.,” a number of you wrote in. Some feedback included:
“You are the voice of a generation. This was pure gold!” — Restructuring Advisor
“This article is next level hilarious.” — Student
“As someone who used to summarize lots of cases and hearings when I was more junior, I can say that your Aero summary is the single greatest thing I’ve ever read.
I think you’ve got the difficulties with equitable remedies flipped. It’s not the prongs on prongs on prongs that are difficult, it’s the evidentiary burden. You hit it right on the head with 14(!) witnesses (and probably hundreds of trial exhibits). Funds that are experts in these types of transactions won’t get caught dead with the smoking gun needed to prove this stuff at trial - either through careful record building early on and/or discovery practice.
But like a judge once told me, sometimes you need to shoot one of the sheep in front of the flock. If this were to happen in a big case with lots of publicity, then behaviors might change. Too many road blocks to that like lowball UCC settlements (a la Payless) and judicial temperaments.” — Biglaw Attorney
But this one took the cake (edited to conceal the writer):
Petition, can't tell you how much I loved the Sycamore Partners article! Can't wait for Pt. 2 to drop.
Your mention of Aeropostale triggered some old thoughts... at the time Aero filed its petition, [I dug] around to see what could be learned about Aero's post-petition real estate tactics... since 2016, I can't stop surmising…
I marveled at this deal then and now. Once the $SPG/$GGP(nka $BRP)/ABG deal was approved, Buyer got to pick lease rejections and assumptions. Simon/GGP's initial proposal (Sept 12) rejected every store lease that wasn't in a GGP/Simon mall. Savage. In the weeks following, I can only imagine the back alley beatings put on $TCO $MAC Westfield $CBL and others as they begged their collective arch-rivals to keep the stores open--oh the blood(rent)letting! The assumption notices started flowing in… no way to know what concessions were in those lease amendments! Just to think of $TCO surrendering rental revenue to Aero to keep Aero in place knowing it [sic] inflicting harm to $TCO's metrics (and possibly its valuation) and was flowing back to $SPG and $BRP. Double bitter. Initially, the deal structure was hush-hush, but in the subsequent earnings transcripts over the last 2 years both $SPG and $GGP have stated plainly that they bought Aero for 1xEBITDA, so have made a killing on the investment alone, not to mention the far more juicy bits.
More importantly, $SPG and $BRP control some of their own tenancy now--all the Aero spaces are available to rent to the right new tenants without sacrificing current occupancy rates. Aero stores are inventory on-demand. Is there a dreadful zombie space of 8,000sf at the wrong end of the mall? Just slot in Areo: goose occupancy rates and ease worries of co-tenancy claims! Bring home all that international licensing revenue, and "distribute" it to the owners in the form of rents, as they may be adjusted. Probably as tax-slick as it gets. $SPG and $BRP scratch each other's backs--I can't image what the Aero Real Estate committee looks like in action! [Authentic Brands Group] presenting leases and amendments in $SPG and $BRP malls to representatives of $SPG and $BRP! Oy! The rents in those new stores could really goose their owner REITs’ reported leasing spreads, occupancy rates and NOI metrics. If the stores’ profitability is not the real objective, then the lines get even blurrier.
Since exiting, I wonder what has changed in footprint within the $BRP and $SPG portfolios, since it is a "captive" tenant? The operator is ABG, of course, but I’ll bet lunch that 100% of the growth stores are in either $SPGor $BRP centers. Or, if Aero has opened in a competitor's mall, I would have to believe it would be at nearly breakeven for the outsider-landlord. So, Aero's store would be oh-so-cash-flow-positive to continue to fund the very competitors of that hapless landlord.
That’s quite a “store growth” story. A decidedly different “where are they now” post Ch 11 success story, indeed.
Is the next chapter ABG's acquisition of Nautica, et al. vis a vis $SPG's Premium Outlets division? I don't know what the right metaphor is… from the perspective of other retailers… but maybe something like the fox setting up an omelet stand in the hen house! — Real Estate Investor
Maybe some bank analysts should start asking some detailed questions about Aero on future earnings calls: as far as conspiracy theories go, that one is pretty damn meaty.
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