It has been a long time of retail carnage: storey names declaring bankruptcy, mass-market brands that shut down thousands of stores, badly outlaw or shut down tens of thousands of store employees. More ominous are still predictions that we will not be shopping the same way again.
For Jamie Salter and David Simon, however, it has been a time of great opportunity.
Mr. Salter is the founder and chief executive of Authentic Brands Group, a company known for buying intellectual property at discounted prices for well-known brands and then making licensing deals with other companies that want to stick those famous names on their products . Mr. Simon is the chief executive of Simon Property Group, the largest mall operator in the United States, with more than 100 properties. Together, they are re-shaping the American retail landscape.
Last week, he closed a deal to buy 202-year-old American fashion brand and retailer bankrupt Brooks Brothers for $ 325 million. Last month, he acquired Lucky Brand Denim and in February, he bought Forever 21.
Together, the acquisition will bring in global revenue generated by the company’s brands – a vast mix that includes the rights associated with Sports Illustrated and Merlin Munro’s likeness – to $ 15 billion annually. And Mr. Salter is hunting more.
Mr. Salter, a 57-year-old Toronto resident, said in a phone, “Look, if the world ends, I don’t think it’s going to happen, then I have no doubt, I’m not so smart.” Interview. “But I don’t believe the world is going to end.”
“Last year, we said within five years, we want to stay at $ 20 billion,” he said, referring to the total revenue generated from brands owned or jointly owned by authentic brands. “We can get one and two to three deals there.”
A number of acquisitions are being made for Simon Properties Authentic Retail Concepts through a joint venture called Mr. Simon. Its roots go back to 2016, but it was built in its current form in January, which turned out to be a vehicle that was positioned almost exclusively to take advantage of the current state of the industry.
By forming the team, Mr. Simon, a Press-Indianapolis real estate scone who declined to comment for the article, is assured that the bankrupt chain and other tenants will remain in their shopping centers, while Mr. Salter is forced to sell his brands. Get a favorable landlord for. At a time when the cost of rent is crushing retailers, and there is a chance to earn money by licensing well-known names. Together, they own and operate 1,500 stores through their deals, sometimes including Brookfield Properties, another mall veteran.
The Brooks Brothers purchase, where layoff notices have already begun, has thrown a light on the arrangement – and invited new investigations. Proponents say Spark is saving businesses it buys. Critics say that it is only for rapid profits in a way to exploit their trauma that cheapens the brands’ legacy. The SPARC strategy, he says, treats brands and stores that are less like the hulls of creativity that need to be cautious, and to maximize as many chess pieces as possible, if momentary, profits. Get.
This suspicion was difficult for Mr. Salter. Last year, Sports Illustrated’s purchase of authentic brands has been seen as a prime example of the company’s bottom-line approach to licensing. It sold the rights to operate the magazine and website to another company, which put the Sports Illustrated name on its employees with protein powders, CBD creams and swimsuits. And Barneys New York’s intellectual property purchases of authentic brands were fiercely contested last year by a group of investors who rejected a social media campaign and name license to block liquidation, including Mr. Salter as the villain Was depicted in Ending a cultural institution.
“It’s not a long-term quality game,” said a retail executive who was not asked to identify as the executive was approached about the Brooks Brothers deal. “It is not about the love of brands or goods. It is predatory and opportunistic. “
To understand the tide of retail, it is very important to understand the business of Authentic Brands.
The company, founded in 2010 by Mr. Salter, bets on well-known names in fashion and entertainment, often purchasing their intellectual property internationally or for the purpose of licensing deals with people willing to use brand names on new products. Authentic brands earn an estimated 4 to 6 percent in royalties through this model.
“History” was one of the answers given by Mr. Salter when asked what he was looking for in a brand. “Do we have good archives that we can bring back, because the world repeats itself all the time. The longer the history, the better. The possibility of cost cutting was another.
For years, Mr. Salter headed a division of a financial firm at Hilco, as it snatched the intellectual property of bankrupt retailers such as Sharper Image. When the retailer’s stores closed, Hilco became involved with deals that named the Sharper image on products such as garment steamers that were cheaper than the original retailer’s merchandise, and then such as Bed Bath and Beyond Were sold in chains.
At Authentic Brands, Mr. Salter made an early coup by acquiring exclusive rights tied to Marilyn Monroe, whose likeness attracted the interest of everyone from Dolce & Gabbana to Walmart. Among his 50 brands now include Juicy Couture, Elvis Presley, Muhammad Ali and Frederick of Hollywood.
The Juicy acquisition in 2013, where Mr. Salter bought the brand, but could not secure its locations, made him realize the value of physical stores. Losing stores, he said, hurt Juicy. He said, “I can tell you that it’s easy to build brands with retail footprints – touch, feel, try”.
However, authentic brands do not have the luxury retailers and types of labels, as European conglomerates such as Kering and LVMH, Mr Salter, said LVMH served as “inspiration” and shared “similar ambitions”. He thinks of his company, where his four sons are one of 200 employees (his eldest, Corey, chief operating officer), a family venture despite a roster of investors including Blacrek, Leonard Green & Partners and General Atlantic . The largest individual investor after Mr. Salter, whose family owns about 20 percent, is Shakeel O’Neill, whose brand is managed by Authentic Brand. Mr. Salter said he considered the initial public offering of the stock but the company had a lot of money and did not want to exit.
“Other people want to,” he said. But, he said, “It’s very easy when you’re two people, and if there’s a problem, you pick up the phone and work in 10 minutes.”
Simon Property also holds around 7 percent after an investment in January, when it increased its interest in SPARC to 50 percent.
Four years ago, Mr. Salter said, “David came to me and said, ‘Why do you always close shops when you buy a company?” “Mr. Salter responded that he was too nervous to operate the stores, worrying that leases could be too expensive. Mr. Simon proposed to team up with Brookfield to buy Aeroprostel, which led to Aero Opco An enterprise named was formed. Mr. Salter owned 20 percent and Brookfield and the rest was owned by Simon. (Brookfield, which is not part of Spark, declined to comment.)
Mall operators wanted their tenants to stop and ideally start making money. He was also interested in Mr. Selter’s marketing skills and his brands, which he felt could eventually turn into shops in his mall.
“Initially, Simon just wanted to get ‘my fare”, Mr Salter said. “But we started turning profits very quickly, and it started being about building a business.”
Each party benefits. Mr. Selter’s brands have a “variable rent” contract with Mr. Simon’s Mall, meaning that their rent goes up and down with their sales, and in an attractive arrangement, most are not minimal. Mr. Simon also receives a percentage of royalties from sales with brand names. In January, Mr. Salter bought Brookfield’s interest and the venture was renamed SPARC.
“Kovid is a good lesson for all of us because thank God we had a percentage rent,” Mr. Salter said. “We reduced the number we gave in Forever 21 to a very low number, and you are only paying rent on the percentage of sales. It hurts very little. “
Still, some analysts say it is not good for mall operators to see their own tenants out of bankruptcy at this pace.
There may be some options. A recently written note and analysts at research firm Coresight Research say it could end unless large retailers or hedge funds are willing to buy bankrupt chains like JC Penney. The firm estimated that 20,000 to 25,000 US retail stores will close this year and at least 50 percent are mall-based.
“Retailers raise questions about the long-term viability of mall owners,” he wrote. Analysts wrote, “Mall owners cannot buy every anchor retailer in their mall and often they will have to let the store fail rather than fail.”
Mr. Simon, on a recent call, emphasized the notion that they were buying rent to retailers. “We believe in the brand and we think we can make money,” he said. He compared critics of the venture to those who asked Amazon to stay in the book business.
Still, rent is no small concern. In the filing, Forever 21, a top tenant at Forever Brookfield and Simon Malls, prior to bankruptcy, said its stores had a total cost of $ 450 million annually. Lucky listed $ 66 million in rent and occupancy costs last year. Brooks Brothers said its 187 store leases and other corporate property leases cost about $ 86 million a year. On top of this, there are co-tenancy agreements, which may require other tenants to break the lease or cut the rent based on the vacancy rate or exit of some retailers.
“I believe the strategy by Simon and Brookfield is to protect their co-tenancy in a lot of cases, but I think it’s a Band-Aid,” said Jackie Levy, chief business officer at Caruso’s Real Estate. California open-air shopping center like Firm Grove. “This may resolve the immediate issue of keeping some of their small retailers or stores, but long term, those leases are going to end at some point and fly to quality.”
For his part, Mr. Salter sees opportunities to reduce corporate employees and melt brands that go beyond sharing e-commerce capabilities. He can imagine, for example, Brooks Brothers teaming up with Spider to create a performance exterior, and with Volcom for swimming trunks. Saks Fifth Avenue still plans to offer Barneys New York shops within its New York flagship and Connecticut stores.
“If I could buy anything, I’d buy Reebok,” he said. “Hannah Barbara.” I love Flintstones, Yogi Bear. There are big ideas for yogi bears. I love Jetson. They should be the delivery system for Amazon. Just call Jetson, they will deliver it to you in two seconds! “
Although Mr. Salter said he was not joining the bid by Simon and Brookfield for Jessie Penny, he can imagine pursuing a similar series in the future.
“There is no doubt that Jamie Salter’s dream is an ABG department store,” Mr. Salter said. “And as David Simon says, maybe one day you will have your own mall.”