NEW YORK — In an unusually large multiple store deal, Coach Inc. will open 20 stores and expand 10 others inside malls owned by Simon Property Group over a two-year period.
"The locations are designated and the economics are agreed upon. We are finalizing the paperwork," said Richard Sokolov, president and chief operating officer of Simon Property.
A Coach spokeswoman said locations will be announced closer to when the stores open and after leases are signed. The first of the 20 is expected to open in July, around the end of Coach's fiscal year.
"It's not uncommon for us to do multiple store deals [with developers], but they tend to be two or three locations," she added. "We are very excited to do a multiproperty deal. It enables us to plan early for manpower, construction and costs." Asked if Coach gets a break on the rent considering the scope of the deal, she replied, "We have always had excellent lease arrangements with Simon and this will be no exception."
Added Sokolov, "This is really just the result of our normal portfolio review process where we try to expose our portfolio to the tenants we want to expand with. But what makes this unusual is that we basically had a session with the senior leadership of both companies and we came up with a series of deals.
"It's not a master lease or blanket deal. The thing that makes this exciting is it's a substantial percentage of [Coach's] new store program, it demonstrates the strength of our overall portfolio and we were able to create a large number of deals in one sitting, if you will."
Other tenants might execute a similar number of leases during a year, but they weren't necessarily in "a similar coordinated fashion," Sokolov noted. Each store has its own lease, he said.
In its announcement, Coach said the arrangement was a "deal in principle" and "the first of its kind" for the company. It only involves full-price stores, not outlets, the company added.
As of the end of December, Coach in the U.S. operated 201 stores and 84 outlets. Coach also operates 109 stores in Japan and two in Canada. In addition, Coach distributes to about 1,000 department and specialty stores in the U.S., and has another 100 points of distribution abroad through either licensed shops, third-party arrangements or wholesaling.The Coach stores in the U.S. average 2,500 square feet in size, with 85 percent of its retail space mall-based; 15 percent is in street locations.
Coach stores are generally situated in premium wings in the malls, near high-end tenants such as Tiffany & Co., Louis Vuitton or Williams-Sonoma. Coach is on track to open 25 stores annually in the U.S., including the Simon properties. Coach also sells through a catalogue and via coach.com.
"Some of Coach's highest volume locations are in Simon-operated malls and lifestyle centers around the U.S. — such as the Forum Shops at Caesars Palace in Las Vegas, Roosevelt Field on Long Island, New York, and The Mall at Chestnut Hill near Boston — all of which will be targeted for expansion or renovation under the new arrangement," Lew Frankfort, chairman and chief executive officer of Coach, said in a statement. "Further, this more formal, multiproperty agreement will allow Coach to better execute our growth strategy and reach more customers in both new and existing markets."
The $2 billion Coach offers handbags, women's and men's small leather goods, business cases, weekend and travel accessories, footwear, watches, outerwear, scarves and other accessories.
The Simon Property Group, based in Indianapolis, is considered the nation's largest developer. It owns or has an interest in 286 properties in the U.S.; 51 shopping centers in France, Italy and Poland; five outlet centers in Japan, and one outlet center in Mexico. Thirty-six of Simon's properties in the U.S. house Coach shops.
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