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  • Writer's pictureAndre Watson

Nation’s Largest Mall Landlord Strikes Deal To Bring Digital Brands to Its Properties

Simon, Retail Startup Leap Plan Debut of Four Stores in California, Florida

One of the Leap stores, True Classic Tees, is slated to open at Simon Property Group's Del Amo Fashion Center in the Los Angeles area. (CoStar)

Simon Property Group, the nation's largest mall owner, drew attention earlier in the pandemic by financially aiding some struggling retailers that rent space in its properties. Now the landlord is helping small online sellers enter the world of brick-and-mortar retailing — while becoming tenants at its malls.

The real estate investment trust's latest proactive effort to reach out to foster renters involves striking a deal to open stores used by companies being shepherded by Leap, a startup that helps digital-native brands launch physical spaces.

Simon said multiple stores working with Leap are opening at its malls, and it plans "to start" by opening four stores in California and Florida: True Classic Tees, an apparel company, at the Del Amo Fashion Center in Torrance, California, and lingerie seller ThirdLove, candy purveyor Sugarfina and Goodlife, a clothing retailer, in Florida's Town Center at Boca Raton.

Zachary Beloff, Simon's vice president of leasing, said in a statement that his Indianapolis-based company will work with Leap "to help introduce growing brands to the value of brick-and-mortar retail." Leap assists retail firms set up and operate physical stores, assuming the leasing risks for those sites.

"This is a pivotal time where stores are top of mind with nearly every brand growing in the U.S., and with the speed and nimbleness of the Leap model, the expansion process has been streamlined immensely," Beloff said. "It is our hope that by working together we will continue to both incubate brands through the Leap platform as well as help them expand throughout our portfolio where they can reach hundreds of millions of their target consumers annually."

There are several factors playing into Simon's deal with Leap, which it has invested in. First, Simon's history of not only being a landlord to retailers, but working with them by either owning or having stakes in a number of once-troubled chains that were at risk of closing — such as J.C. Penney, Brooks Brothers and Aeropostale — that occupy or anchor its properties.

Goodlife, an apparel seller that’s opening stores with Leap’s help, will be debuting a brick-and-mortar location at the Del Amo Fashion Center, which is owned by Simon Property Group, in the Los Angeles area. (Leap)

Second, there's a now a long list of digital-native retailers — including e-commerce giant Amazon, footwear firm Allbirds and eyewear provider Warby Parker — that have felt compelled to open actual stores to drive their sales. In fact, those types of companies are a new category of retail tenants for landlords such as Simon, so analysts say it's in the REIT's best interest to try to foster more of these types of mall occupants, the next would-be Warby Parkers.

And Leap isn't the only company working with brands looking to make the jump into physical space.

"There have been similar retail concepts in the past such as Neighborhood Good and Showfields that provide a launchpad for new brands that want to test and learn in brick and mortar before committing to a full lease," Amanda Lai, senior manager for retail consultant McMillanDoolittle, said in a an email to CoStar News.

"Rather than a retailer offering space for brands to rent smaller scale space in physical retailer, Simon as a property developer seems well-positioned to provide a similar offering to brands," she said.

Early-Bird Advantage

"This is a great opportunity for Simon to find new and interesting brands to put in its malls," Neil Saunders, managing director of analysis firm GlobalData, said in an email. "This helps to fill space and to create offers that are interesting for consumers. By partnering in this way, Simon will also have an early-mover advantage with any brands that prove popular and grow."

For Leap, the deal is a huge opportunity for it to expand its brick-and-mortar footprint, according to Amish Tolia, the company's co-founder and co-CEO. Leap describes itself as building the world's largest network of branded retail stores powered by data, technology and scale.

The company said its platform enables brands to rapidly deploy stores that will "work in concert with e-commerce and at significantly reduced cost and risk ... versus the conventional approach — doing it all in-house."

Simon operates or has an ownership interest in more than 250 retail properties globally, while Leap said it "is powering" 60 brands across nearly 100 stores.

In January, Leap secured $50 million of Series B financing from a group led by BAM Elevate, with participation from new and existing investors including Simon, Harbor Spring Capital, Northern Trust, Costanoa Ventures, Hyde Park Venture Partners and Equal Ventures.

"The team invested in our Series B raise, and now, we're pooling our competitive advantages and data-driven approach to deploy the next generation of brands in prime shopping centers across the country," Tolia said in a statement Wednesday on the Simon deal. "This collaboration, in addition to opening physical stores, is also enabling brands to rapidly build and scale an omnichannel retail presence."

Manhattan Expansion

Leap's growth in 2021 provided brands such as not only ThirdLove but Naadam, Something Navy, Mack Weldon, Lunya, Birdies and Ring Concierge to debut stores in New York, Chicago, Los Angeles, San Francisco, and Scottsdale, Arizona.

"Our retail expansion wouldn't be possible without the Leap platform, so the fact that Leap is working with Simon makes us even more excited for the future of our brand," Andrew Codispoti, Goodlife co-CEO, said in a statement about the deal announced Wednesday.

Earlier this year, Leap signed a five-year, 12,159-square-foot lease at 99 Hudson St. in the Tribeca neighborhood in lower Manhattan, after outgrowing its 3,000-square-foot space at 40 Wooster St. nearby in SoHo, quadrupling its Manhattan office footprint.

The company is co-headquartered in New York at the Hudson Street address and at 620 N. LaSalle St. in Chicago.

Leap's activities in New York this year have included signing several leases for fashion brands in trendy Williamsburg in Brooklyn.

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