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Simon Property Group Seeks To Block Ascena Retail's Chapter 11 Reorganization

Mall giant Simon Property Group is suing to prevent approval of Ascena Retail Group's reorganization following its Chapter 11 bankruptcy, specifically the plans a private equity firm has for Ascena's stores. The retailer, which owns such retail brands as Ann Taylor, Lane Bryant and Loft, filed for bankruptcy last summer, at which time the company said it planned to close 1,600 of its 2,800 stores.

Loft, one of Ascena's brands

The bankruptcy court agreed in December to let private equity firm Sycamore Partners buy most of Ascena's retail assets. Simon alleges in its suit that Sycamore is planning to close more stores than it agreed to when it bought Ascena's brands. 

"Through the sale, the Purchaser promised to 'tak[e] at least 900 stores as part of this process, preserving the business, [and] thousands of jobs' ... leaving for a later day the determination and process for assumption and assignment of specific store leases," Simon alleges in the suit.

"Since then the Purchaser has laid bare its intention to significantly reduce the business’ physical store presence in the near term," the suit alleges. "The result will be a significantly less creditworthy lessee than the entity with which the Simon Landlords originally contracted."

Simon said in the suit that Sycamore's plans for a reduced store footprint and the mix of remaining stores would not only cut into the profitability of the physical stores' business but also hurt the associated e-commerce business as well, reasoning that a strong physical presence drives e-commerce.

Simon also called Sycamore out for its track record in owning or investing in retailers. The suit said Sycamore has overseen the bankruptcy of a number of retailers it has invested in, including Nine West, Aéropostale, Belk and Talbots.

"These maneuvers imperil the business and its brands, causing the Purchaser to bear no resemblance to the tenant the Simon Landlords contracted with at lease-inception," the suit further alleges.

Sycamore did not respond to a query by Bisnow for a comment about the suit.

Simon reported on Monday that its portfolio net operating income for the full year 2020 declined 17.1% compared with 2019. The company attributed the drop to reduced revenues from tenant rent abatements, higher uncollectible rents and lower sales-based rents. Occupancy at Simon properties was 91.3% at the end of last year. At the end of 2019, occupancy was 95.1%.

As of early 2021, Simon owned or held an interest in 206 U.S. properties: 108 malls, 67 Premium Outlets, 14 Mills, four lifestyle centers and 13 other retail properties.