Mall landlords may start to offer loans to help keep struggling retailers afloat, helping to keep malls occupied.
Specifically, PJ Solomon, a boutique bank, has organized talks with several mall owners to pursue such a plan for retailer Forever 21, Bloomberg reports, citing people familiar with the matter.
The model being considered would convert rent and other liabilities into secured debt that would help distressed companies stay out of court, according to the people.
If the borrower does fail, the arrangement gives landlords a stronger hand in the restructuring process because lenders get a higher priority in a bankruptcy.
The landlords could also use the status to bid for assets, swapping unpaid claims for ownership.
Three years ago, Simon Property Group and General Growth Properties (now part of Brookfield Property Partners) bought Aeropostale to save more than 200 of the clothing chain’s stores.
Over 7,500 U.S. retail stores have closed this year, according to Coresight Research; less than half of U.S. malls are likely to survive the industry’s disruption, said Bloomberg Intelligence analyst Lindsay Dutch.
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