Leases for nearly 100 Forever 21 stores, the chain's Los Angeles headquarters, and a distribution center have gone on the block in the wake of the retailer's bankruptcy filing.
New York-based RCS Real Estate Advisors is marketing the properties, which span 32 states and Puerto Rico. Of the 94 stores on the list, 18 are in California, and seven are in Texas. The lease for the fast-fashion retailer's large headquarters, 163,955 square feet at California Market Center, is also for sale, as is the lease for its 656,695-square-foot distribution center at 4323 Indian Ave. in Perris, California.
RCS is actively responding to all inquiries as a first step to gauging interest, according to Spence Mehl, a partner at the firm.
Forever 21 filed for voluntary Chapter 11 bankruptcy protection last weekend, saying it planned to wind down its business and close all its stores. Weeks before the filing, in February, Forever 21 had already starting shutting stores and holding liquidation sales. Its retail portfolio overall includes about 360 store leases with about 7.6 million square feet.
Forever 21 is one of a number of chains in the past 12 months or so that have gone bankrupt, liquidated and sold some or all of their store leases, a group that includes 99 Cents Only, Big Lots, Party City, and Joann. Ollies Bargain Outlet was among the buyers, picking up dozens of 99 Cents Only and Big Lots leases. RCS said the Forever 21 leases offer a chance for an expanding retailer to secure space in a tight market, while at least one retail expert said the spaces present some issues for would-be tenants.
The currently available Forever 21 leases are for stores in malls, strip centers, and urban locations, according to the marketing brochure for the properties. The stores range from 4,000 to just over 150,000 square feet. The biggest one, 153,500 square feet, is at the Galleria at Tyler in Riverside, California.
The available leases offer "incredibly favorable" terms, according to the brochure, with many of them "percentage only" leases. That typically means that a retail tenant pays a landlord a portion of its monthly sales, on top of a base rent, rather than a flat fee.
"RCS is positioning Forever 21’s lease spaces as highly attractive brick-and-mortar locations, offering prospective tenants a unique opportunity to secure prime retail space in high-foot-traffic areas at extremely favorable lease terms," Mehl said in an email to CoStar News on Wednesday. "With stores located in premium locations at competitive lease terms — including several stores listed as percentage-only leases, — Forever 21’s properties offer a compelling opportunity for growth-oriented brands."
But there are several challenges to re-tenanting the Forever 21 space, according to Andy Graiser, co-president of A&G Real Estate Partners. First, some of the spaces have irregular shapes, he told CoStar News.
"Normally, you'd like to see for a traditional apparel store a nice rectangular box," Graiser said. "But some of these are multistories. Some of them are really large. Some of them have a configuration that's just not what I would call a clean box. Therefore, replacing them is going to be pretty costly for a landlord, not to say that they're not going to. But sometimes, just because of the configurations, it's going to be a little bit more expensive."
In addition, constructon costs are soaring, impacting any tenant who wants to build out and occupy Forever 21's second generation space, according to Graiser.
"In fact, what we're finding is that the contractors aren't holding their price past 60 days," he said. "And that becomes a little challenging because sometimes it takes 60 days just to get permitting done."
Forever 21's portfolio of retail spaces includes a wide range of store sizes and layouts, according to Mehl.
"RCS is also marketing these spaces to a diverse set of retailers, emphasizing how the available spaces are ideal for various tenant types and needs," he said.
Available office, logistics space
Forever 21's headquarters space is coming on the market in an inopportune time for the downtown Los Angeles office sector, likely contributing to its rising vacancy rate. The retailer is the biggest tenant at the 1.8 million-square-foot California Market Center at 110 E. Ninth St., a building is owned by Brookfield Properties.
When Forever 21 signed the lease for its roughly 164,000 square feet in 2022, it was the biggest new office deal in downtown Los Angeles since the onset of the pandemic. COVID had essentially shut down the city as tenants and residents left, spiking office vacancy rates.
Forever 21 pays $606,200 in monthly rent for its headquarters, according to the marketing brochure.
"RCS is actively marketing the L.A. HQ to determine interest," Mehl said.
The retailer's distribution center lease is for a logistics facilty owned by Prologis in the Inland Empire area of California, according to CoStar data. Forever 21 occupies the entire property, and pays $338,774 in monthly rent, according to the brochure.
Unless a going-concern buyer appears, all 360 Forever 21 stores will close, Mehl said. The 260 leases that RCS isn't marketing are considered of no value, according to Mehl.
Forever 21 "will reject those leases as part of the bankruptcy process and exit those locations," he said. "The same applies to any location we are marketing that is not sold."
There are already plans for one of Forever 21's larger Florida spaces, about 116,000 square feet at The Avenues mall in Jacksonville, Florida, to be repurposed. PrimeTime Amusements plans to open one of its experiential venues, Elev8 Fun Indoor Adventure Parks, in the space, according to the Jacksonville Business Journal.
The process of soliciting bids will take 30 to 60 days, according to Mehl. An auction will be held if there are competing bids for specific leases, he said.