TheChek News Flow

As we’ve been telling you over the past few days, private equity executives have it pretty sweet. So it takes a lot to make them envious. 

But the eye-watering profits reaped by dealmakers behind special purpose acquisition companies, or Spacs, might just do it. 

Take former Citigroup banker Michael Klein, for example. A group of investors led by Klein merged their first Spac, Churchill Capital Corp, with Clarivate, a little-known data analytics company, in 2018. 

As is usual with sponsors when they set up a vehicle, they put in $25,000 for a 20 per cent stake in the Spac equity. Today they’re sitting on more than $400m worth of winnings. 

This is all a benefit of something called the “promote” and it helps to explain, at least in part, why Spacs have become the hottest product on Wall Street. 

An analysis by DD’s Ortenca Aliaj, Sujeet Indap and Miles Kruppa found that promotes for four sponsors behind 10 Spac deals formed over the past two years are now worth a combined value of almost $2bn. Collectively, sponsors would’ve put in $250,000 upfront. Not a bad ratio.

That kind of windfall has led some, like the short-seller Carson Block, to label Spacs “the great 2020 money grab”. His hedge fund Muddy Waters announced on Wednesday that it’s betting against MultiPlan, another company that Klein took public via a Spac. 

Shares in the company are now down about 30 per cent to $6.30, significantly below the $10 price at which investors buy into the Spac’s initial public offering. Klein and his investment group still stand to profit from the deal with a promote worth close to $90m.

The promote is viewed as payment to the sponsor for setting up the vehicle, finding a target and executing the merger. The problem is, with incentives being as lucrative as they are, it may lead some sponsors to strike a deal even when it’s not necessarily with the best company. 

That’s the argument Block makes in the report outlining his short thesis on MultiPlan. “A business model that incentivises promoters to do something — anything — with other people’s money is bound to lead to significant value destruction on occasion,” he wrote.

Things are rarely this simple, though. Many of the sponsors that Ortenca, Sujeet and Miles investigated have other means to align their interests with shareholders. For example, Klein’s group will put in hurdles linked to a company’s stock price so investors can’t just dump the stock once the deal is done.

Chamath Palihapitiya and the British investor Ian Osborne, who together have launched six Spacs and are currently sitting on a $370m promote for taking Richard Branson’s Virgin Galactic public last year, will put more of their own money into the deal. Other sponsors agree to give up a part of their founder shares to get a deal done. 

But the reality is, success is hard to come by in the Spac world. When we looked at deals struck between 2015 and 2019, two-thirds of the vehicles that found targets were trading below the $10 IPO price. 

Despite that, sponsors often stand to make millions from the deals. 

The turning of the leaves in Manhattan should also mean a windfall for hotels, as tourists from around the world flock to witness a New York City of cinematic proportions — the Macy’s Thanksgiving parade, window-shopping along Fifth Avenue, the tree at Rockefeller Center.

But all that will have to wait for now, perhaps until next year as a coronavirus vaccine breakthrough by Pfizer and Germany’s BioNTech offers a glimmer of hope just in time for the holidays.

In the meantime, “no vacancy” signs across New York’s 640 hotels collect dust, with four out of five properties underpinning commercial mortgage bonds now feeling the strain of the crisis, and investors fretting over whether hoteliers will be able to repay loans.

“Realistically we aren’t going to see any improvement until the second quarter . . . The industry is really bleeding. It’s not just on life support, it’s comatose,” Vijay Dandapani, chief executive of the Hotel Association of New York City, told the FT’s Joe Rennison. 

A 50 per cent survival rate of the city’s hotels would constitute a “great” outcome, he added. Commercial mortgage-backed securities data company Trepp categorises 37.7 per cent of all New York hotels on its watchlist, designed to warn investors before a mortgage is transferred to debt collectors known as special servicers.

And that’s only half the story — add the number of hotels whose mortgages have gone to debt collectors, and roughly 4 out of 5 hotels in CMBS deals are in hot water.

Among ailing properties is the Trump International Hotel at 1 Central Park West, whose $6.5bn mortgage was added to Trepp’s list following a substantial drop in income, adding to the US president’s $1.1bn debt pile due to the Covid-stricken real estate market.

Some beleaguered hotels, like The Lucerne in Manhattan’s Upper West Side, have been repurposed as shelters by the city’s Department of Homeless Services, a programme that polarised the local community. Participating hotels were paid $174 a night per room, according to The New York Times.

As New York veers “dangerously close” to a second wave of the virus, the streets of Midtown and Times Square ought to remain less congested than usual in the months to come.

WeWork burns through another $500m in third quarter

Shared office provider suffers decline in members and revenues during pandemic

WeWork burnt through another $517m in its latest quarter, cutting into the lossmaking office space provider’s cash pile as the coronavirus pandemic continued to weigh on the real estate industry.

The company said outflows in the third quarter reduced its cash cushion — money in hand plus commitments from its biggest backer SoftBank — to $3.6bn, according to an email from Sandeep Mathrani, chief executive, to employees on Thursday. That figure stood at $4.1bn the quarter before.

The cash burn has garnered keen investor interest as one of the best gauges of WeWork’s ability to outlast the pandemic. The company, which last year scrapped its initial public offering after lacklustre investor interest, has burnt through $1.7bn of cash since the start of the year, including $671m in the second quarter.

Marcelo Claure, the SoftBank executive who took over as WeWork executive chairman in the midst of its turmoil last year, said in July that the office space lessor would generate positive free cash flow next year.

That has remained the bar for Mr Mathrani even as demand for office space has fallen in cities across the globe this year. WeWork has suffered tenant losses as many businesses adopted work-from-home policies.

Sales continued to slow, falling 13 per cent in the three months to the end of September from the same period last year. The company reported an 11 per cent drop in members over the course of the quarter, to 542,000. WeWork did not disclose its profit or loss in the quarter.

To cut costs, WeWork has laid off thousands of employees and closed underperforming buildings. It has also sold assets, including women-focused office space provider The Wing and online scheduling business Teem.

Mr Mathrani told employees that WeWork had signed agreements to exit 66 of its properties and had renegotiated the leases on more than 150 other buildings, together accounting for about a quarter of its 859 global locations.

“While Covid continues to present unique and uncertain challenges that we must actively manage, our results this quarter show signs of select key metrics stabilising,” Mr Mathrani wrote.

The Spac sponsor bonanza

FT analysis shows backers of cash shells earn billions in what Ackman calls ‘one of the greatest gigs’

In June, a group of investors led by the former Citigroup investment banker Michael Klein reaped more than $60m from a $25,000 investment. The stunning return was achieved in less than two years. More impressive still: it was only a partial sale and their remaining stake is worth about $400m.

The windfall helps explain why special purpose acquisition companies — which raise cash on the stock market and hunt for a private company to take public — have become the hottest product on Wall Street.

Few have replicated Mr Klein’s success, which he achieved after using a Spac to take the data company Clarivate Analytics public in 2019. But many have tried. The prospect of quick riches has attracted all sorts of copycats from hedge fund managers to retired political figures and sports executives. 

So far this year, 156 Spacs have raised more than $55bn, and 76 Spacs in the US have announced acquisitions with a combined value of $95.2bn, according to the data provider Refinitiv. 

A Financial Times analysis of Spac deals by four prominent sponsors of the vehicle within the last two years shows just how lucrative the structure can be for the sponsors who are paid in the form of a “promote”.

The promote usually involves sponsors taking 20 per cent of the Spac’s equity for a nominal purchase price of $25,000. That stake converts into a smaller slice of equity in the new company when the Spac executes a merger, and can lead to a big pay-off if, like Clarivate, the acquired company prospers. 

The 10 Spac deals analysed by the FT were brought by the following sponsors: Mr Klein; the former Facebook executive Chamath Palihapitiya; the longtime media executive Harry Sloan; and Gores Group, a California-based private equity firm.

The analysis found that promotes for the four sponsors were now worth a combined value of almost $2bn across the 10 deals.

The biggest rewards have naturally come from companies that have performed well on the stock market. However, even those Spac-sponsored companies that struggle can leave backers holding sizeable profits. 

Bill Ackman, the hedge fund billionaire, believes the structure is “one of the greatest gigs ever for the sponsor”.

“You get 20 per cent of the company tax free until you sell the stock,” he told the FT. “That’s why you have so many people doing it.”

Mr Ackman launched his own Spac this year, Pershing Square Tontine Holdings, which in July raised a record-breaking $4bn. However, he chose not to create founder shares.

“[The] compensation structure [on the standard Spac] creates a misalignment of incentives,” Mr Ackman said. “The massively dilutive nature of founder shares often makes it difficult to complete a deal on attractive terms for the Spac’s shareholders.”

The promote has also caught the attention of Jay Clayton, the chairman of the US Securities and Exchange Commission. He expressed concern about the impact on ordinary investors. “We want to make sure that investors understand those things and then at the time of the transaction . . . that they’re getting the same rigorous disclosure that you get in connection with bringing an IPO to market,” he recently told the CNBC business news channel.

Public investors ‘in the hole’

Founder shares, given out for a pittance, can create a drag for ordinary investors who typically pay $10 for each of their shares in a Spac. After a deal, the company can even fall in value and sponsors with discounted shares may still come out ahead.

“The public Spac investors start, effectively, 25 per cent in the hole,” said Steven Kaplan, a private equity expert at the University of Chicago Booth School of Business, referring to the 20 per cent promote and other standard fees. “Sponsors argue that public investors have the option to not invest. Still their money is tied up. It’s a great deal for the promoters and underwriters.” 

The promote is typically viewed as payment to the sponsor for their efforts in finding the target company and executing the merger. That work often includes installing a management team for the company as well as locating other cornerstone investors for the deal.

For his stable of Spacs, branded Churchill Capital, Mr Klein’s investors include his own firm, M Klein Associates, and other financial backers including Oak Hill Capital and Magnetar Capital, as well as a team of “operating” partners with industry experience such as Ford’s former chief executive Alan Mulally and Apple’s former design chief Jony Ive.

Mr Klein also uses his eponymous firm M Klein and Company as an adviser on all his Spac deals, raking in millions of dollars. Churchill has separately agreed to pay The Klein Group, an affiliate of his advisory firm, almost $50m on the three deals agreed so far. Mr Klein declined to comment.

That is not the end of the list of ways in which Spac sponsors can juice their returns. Typically they get the option to purchase warrants in the Spac, which allow them to buy shares of the merged company at a particular price. If the stock rises to the point that the warrants are in the money — typically this happens at $13 — the sponsor has another inexpensive source of profits in addition to the promote and deal fees.

Mr Palihapitiya and the British investor Ian Osborne have seen the value of their stakes increase significantly after their Spac took Virgin Galactic public in 2019. Shares in the space tourism company have surged to about $22 a share, pegging the value of the duo’s promote at more than $370m. 

In an email, Mr Palihapitiya said it would be “inaccurate” to analyse the value of the promote without considering additional cash he had put into the company. He also invested $100m in Virgin Galactic at a cost of $10 a share when it went public.

Mr Palihapitiya, who together with Mr Osborne has raised another $2.1bn through three new Spacs, has separately committed at least $150m to his subsequent merger targets.

The good times ending with ‘Spac-offs’?

There are signs that the promote is becoming less lucrative for sponsors. A consequence of the boom in Spacs is that private companies can now negotiate a better deal. In “Spac-offs”, private companies pit various cash shell suitors against each other. The final deal terms are now increasingly seeing promotes whittled down, to the favour of the selling companies.

When Mr Klein’s Churchill announced in 2018 that it would merge with the private equity-backed Clarivate, it agreed to an unusual provision that it said better aligned itself with other shareholders. Stock belonging to the promote group would not fully vest until Clarivate’s stock price hit $17.50, and lockups were put in place to prevent the investors from dumping the stock straight away. 

That moment in June in which Mr Klein and his partners cashed in more than $60m came after the stock had doubled to more than $20, in part thanks to a deal to buy the intellectual property management and technology company CPA Global. Onex and Barings, the two private equity firms that owned Clarivate before it went public via Mr Klein’s Spac, also sold stock at the same time.

Clarivate’s share price has since risen to $27.69, so the value of Mr Klein’s remaining stake has continued to swell and his investor group still holds shares worth $395m. The group also has separate warrants on top further augmenting their potential profit.

Another successful Spac deal, involving the sports-betting site DraftKings, has soared to as high as $63 a share less than a year after announcing its merger in December. Its backers, serial Spac sponsors Mr Sloan and Jeff Sagansky, made similar concessions in merging their vehicle with DraftKings by giving up a portion of their promote and only letting some of their shares vest at higher stock prices. Still, their promote stake today is worth more than $200m. 

Repeat success has, however, not come easy for most sponsors. A second deal from Mr Klein, in which he closed an $11bn merger with the healthcare group MultiPlan this summer, has not fared as well as Clarivate. MultiPlan’s shares have traded down to below $8, threatening the ability of Churchill Capital to earn all its promote shares. Still, Churchill sponsors have a stake worth almost $80m.

MultiPlan attracted the attention of short-seller Carson Block, who this week revealed he had placed a bet its share price will fall. At the same time, he launched a broadside against the whole Spac phenomenon, which he called “the great 2020 money grab”.

“A business model that incentivises promoters to do something — anything — with other people’s money is bound to lead to significant value destruction on occasion,” his investment firm Muddy Waters wrote.

Whatever the ultimate outcome for MultiPlan, Mr Klein’s ventures have already highlighted the asymmetry of Spac mathematics: the risk in Spacs falls most heavily on outside shareholders even as the return on investment for sponsors looks very promising indeed.

CVC and Advent seek super league ‘breakaway’ clause on Serie A deal

Private equity looks to protect investment in Italian football from new European project

CVC Capital Partners and Advent International want to add a “breakaway” clause to their €1.6bn deal to buy into Italy’s Serie A football competition to protect their investment if a rival European super league is launched.

The two private equity firms are part of a consortium with Italian investment fund Fondo FSI that is hoping to buy 10 per cent of a new company that will manage the broadcasting rights for Italy’s top football division.

That deal is in its final stages, but has been complicated by last month’s revelations that some of Europe’s biggest clubs are in discussions to create a new continental competition that could threaten the primacy of national leagues.

International investors have become increasingly interested in European domestic football leagues — which have suffered significant losses during the pandemic — because of the huge global audiences and valuable broadcasting rights. Private equity firms have approached Germany’s Bundesliga and Spain’s La Liga in recent weeks.

Any agreement reached by Advent and CVC to protect their Serie A investment could set the tone for other investors.

The two firms are worried about the potential for a new European competition to entice Italy’s biggest clubs including Juventus, Inter Milan and AC Milan away from Serie A, according to several people with knowledge of the developments. 

Last month Josep Maria Bartomeu, the outgoing president of FC Barcelona, said his club has approved participation in a “future European super league of clubs, a project put forward by the biggest clubs in Europe”. 

That super league project is being led by Real Madrid president Florentino Pérez, who is working with investment bank JPMorgan to create a €6bn debt financing package to launch the competition, according to people with knowledge of the plans. 

Mr Pérez’s design is to replace the Champions League, the annual club competition run by Uefa, European football’s governing body, which distributes €2bn between participating clubs. 

The super league would include up to 20 teams that would play each other in midweek games, leaving them to continue to play domestic fixtures at weekends. 

Still, executives at CVC and Advent are worried this would damage the prestige and global audience for national leagues, hitting the value of broadcasting and sponsorship deals.

They also fear that the best players could be diverted to play in the new European contest, with domestic leagues becoming in effect “B-teams”. 

Next week, Serie A clubs will meet for a crucial vote on whether to proceed with the proposed private equity investment. 

If they agree, Advent and CVC are set to be offered a mechanism — dubbed by some a “breakaway” or “anti-embarrassment” clause — that would be activated if the super league happens, according to people with knowledge of the plans. 

While it is unclear how the clause would work in practice, its aim would be to mitigate damage caused to the firms’ Serie A investment depending on the structure and impact of the super league.

CVC, Advent, Serie A, Real Madrid and JPMorgan declined to comment.

The $5tn club: Merger mania sweeps asset management industry

Only half of investment houses will still exist by 2030 as size becomes crucial to success, research predicts

Ten titans that each oversee more than $5tn will emerge as the asset management industry’s dominant players by the end of the decade as size becomes a critical driver of success for investment companies globally.

Only half of the fund industry’s current asset management companies will still exist by 2030 following a massive escalation in mergers and acquisitions activity, according to Piper Sandler, a Minneapolis-based investment bank, which has advised on more than 80 asset management deals worth more than $50bn.

“The survivors will need to be effective dealmakers. They will use M&A to build on their strengths, fix weaknesses and ultimately to propel growth,” said Aaron Dorr, head of the asset management investment group at Piper Sandler.

The upswing in M&A activity is being driven by deep structural challenges including demographic shifts, downward pressure on fees and revenues, and ever-increasing costs due to technology spending and changing regulatory requirements.

Speculation and gossip about which asset manager might be the next to be acquired have reached a feverish pitch after the activist investor Nelson Peltz’s Trian hedge fund established stakes of nearly 10 per cent in both Invesco and Janus Henderson.

In an interview on CNBC television this week, Mr Peltz said the asset management industry “needs scale”. “I’m hoping that Invesco will be the prime mover in doing that,” he said.

Other senior Wall Street leaders have also made unusually frank public statements about their desire to pursue fund management deals.

Jamie Dimon, chief executive of JPMorgan Chase, said last month that his bank was “very interested” in buying an asset manager, adding that his door was “wide open” for deal partners.

David Solomon, chief executive of Goldman Sachs, said last month that organic growth was the priority for its asset management business but he would “take a very hard look” if a suitable acquisition opportunity appeared. 

“The marriage season is heating up. The asset management industry is now gripped by merger mania. The question is whether any of the deals will deliver for shareholders,” said Amin Rajan, chief executive of Create Research, the consultancy.

In an interview with Bloomberg this week, Stephen Bird, the new chief executive at Standard Life Aberdeen, said he was “thinking of acquisitions” which could include buying an exchange traded fund business.

Analysts immediately highlighted the possibility of a deal with Lyxor, the €150bn French asset manager and the third-largest ETF provider in Europe. Lyxor has been the subject of takeover speculation for more than a year.

“With Lyxor reportedly for sale, this might suggest Standard Life Aberdeen is a potential buyer,” said Tom Mills, an analyst at Jefferies.

Many fund managers have been forced to consider dealmaking in a bid to shore up profits. Profit margins — operating profits as a percentage of net revenues — have remained flat even though client assets overseen by the asset management industry have doubled in size since the end of 2008 from $39tn to $89tn by December 2019, according to Boston Consulting Group.

Pressures on profits for traditional active managers are expected to increase further as their high fees and inconsistent performance fuels an ongoing shift by investors into low-cost trackers.

An analysis by Piper Sandler shows that more than a fifth of actively managed US funds sold to retail investors had registered five consecutive years of net outflows by the end of 2019. Only 11 per cent of actively managed US funds saw positive inflows over the same five-year period.

Larger groups, however, appear better equipped to deal with the headwinds facing the industry, including a hit to profits.

“The big [actively managed] funds are getting bigger as the smaller funds try to hold on to their assets. Larger managers with a broader product suite are better equipped to offset outflows from those strategies with inflows elsewhere,” said Piper Sandler’s Mr Dorr. 

“Scale matters. Managers are finding that scale is no longer a lofty ambition but a requirement. M&A has become the most direct route to achieve scale.”

The pressing need for fund companies to build larger, more efficient businesses has been highlighted this year by Franklin Templeton’s $6.5bn acquisition of Legg Mason and Morgan Stanley’s $7bn deal for rival Eaton Vance.

Banks with existing asset management or wealth management capabilities that also have excess capital are well placed to pursue deals, according to Morgan Stanley. It highlights State Street, BNY Mellon and Mediobanca, as well as JPMorgan and Goldman as potential predators. Traditional asset managers including T Rowe Price and Waddell & Reed also have excess capital, while both Amundi and Schroders have already demonstrated their appetite for deals. 

“Asset management is the second-most fragmented industry globally after capital goods. The top 10 firms have a combined market share of just 35 per cent. In more concentrated industries, the top dozen or so players typically command 75 per cent market share,” said Michael Cyprys, an analyst with Morgan Stanley in New York. 

Potential targets that have niche product or distribution capabilities that would be attractive to a buyer include BrightSphere, Virtus, WisdomTree, Ashmore and Man Group, the world’s largest listed hedge fund manager, said Morgan Stanley.

Shares in BrightSphere, a $180bn New York-listed multi-boutique, jumped this week on reports that it is exploring the sale of its private equity affiliate Landmark for $1bn.

“The $1bn price tag reported for Landmark is clearly above expectations,” said Christopher Harris a senior analyst at Wells Fargo.

Other players caught up in talk of deal activity include Bank of Montreal (BMO), which is examining strategic options for its $273bn asset management division. BMO, which bought London-based F&C Asset Management for £708m 2014, could reduce the footprint of its business outside of its home market in Canada, according to company observers. 

Wells Fargo is also exploring a sale of its $578bn asset management business in a push by chief executive Charles Scharf to restore the troubled San Francisco-based bank to health.

The Los Angeles-based private equity group Ares Management last month proposed a takeover of AMP, the A$200bn (US$145bn) wealth and asset manager. Terms of the offer were not disclosed but AMP shares have since risen 35 per cent, valuing the company at close to A$6bn. Citigroup has suggested that Macquarie, which has excess capital, might also table a higher rival bid.

Despite the prospect of unprecedented dealmaking in the fund industry, Mr Cyprys cautions that building scale via M&A is no guarantee of success.

“Shareholders this far have not rewarded scale driven acquisitions given their lacklustre track record. Perhaps the biggest challenge for any large scale M&A deals is ensuring that any combination improves the top-line revenue trajectory,” he said.

Shopping malls need to travel back to the future

Customers will return to physical stores after the pandemic, but suburban retail boxes are beyond rescue

The mall was once the heart of suburban American life: families shopped, teenagers hung out and Hollywood set films there. But its attractions have faded and coronavirus has made things even worse.

The mall’s malaise prompted two events this week. Simon Property Group, the biggest US mall operator, was cleared with Brookfield Asset Management to buy the department store chain JCPenney out of bankruptcy for $1.75bn. Meanwhile, investors blocked a capital-raising plan at the European group Unibail-Rodamco-Westfield, which runs 89 malls in Europe and the US.

The chief culprit for the turmoil is the internet, particularly Amazon, which has eliminated the need to drive to a mall to browse for wares. The way in which retailing has changed was also shown this week by the clothing group VF’s takeover of the streetwear brand Supreme for $2.1bn — more than JCPenney’s valuation, despite the latter’s 800 stores and 118-year history.

The shopping centre is not a lost cause. It could even gain from the pandemic in the long term, if more families take advantage of remote working and move to suburbs. They will not want to spend all their money online and gathering shops in a convenient spot remains a sensible idea.

But malls need to evolve from the two-storey, air-conditioned boxes that border many towns, with department stores such as JCPenney anchoring the ends and food courts in the middle. They must be more enticing, less uniform and smaller; they could even learn from the high streets they replaced.

The classic mall was created by Victor Gruen, an Austrian immigrant to the US, in the postwar move to suburbs unleashed by the car. Living in Los Angeles, with its traffic-laden streets, he imagined “a neighbourhood centre that would be located off a main road” with a single building “of a pleasant and modest design”, as he later recalled in his memoir, Shopping Town.

Gruen’s mall was intended to foster local communities, with a post office, public library and doctor’s offices, as well as shops. His first design was opened in 1954 in Detroit and the second in 1956 — the Southdale mall in Edina, Minnesota. Southdale was inspired by “European galleries and passages, especially the Galleria Vittorio Emanuele II in Milan”, Gruen wrote.

You could stare at most strip malls for a long time without being reminded of the iron and glass vaulted roof of Milan’s Galleria, which opened in 1877. That is partly Gruen’s fault, for his shapes were less elegant, but his utopian ideal was also degraded as philistine developers dotted them across the US.

Aesthetics are not the suburban mall’s biggest problem. More than half of US retail sales once took place in malls but they peaked in the 1990s, steadily sagging as city centres revived and ecommerce expanded. The foot traffic in Canada’s top 10 malls fell by 22 per cent from 2018 to 2019, before the pandemic.

A quarter of the 1,000-odd remaining US malls now look likely to close in the next three to five years, according to Coresight Research. It is not surprising, given that their business model of department store “anchor tenants” drawing in shoppers to browse other outlets is outdated.

Neiman Marcus, a fixture of upmarket US malls, went into Chapter 11 bankruptcy in May, along with JCPenney, emerging in September. “It feels as though the idea of the anchor tenant is an anachronism. Those stores are not anchors any more,” says Joel Bines, global co-head of retail at AlixPartners, the consultancy.

An end to the pandemic would help malls to stabilise, but they also need to recapture some of their former magnetism. They could take a lesson from Supreme, founded in 1994 on Lafayette Street in lower Manhattan as inner cities revived. It built a devoted following from its skateboard origins, with fans lining up outside its 12 stores (six of them in Japan) when it has a “drop” of its new designs.

Unlike the classic mall, a product of postwar plenty, Supreme has played successfully with scarcity and novelty — 45 per cent of its sales are outside the US and more than 60 per cent online. Gruen wanted to build communities of suburban shoppers but Supreme has created one of its own that spans physical and digital worlds.

Supreme is at the rarefied end of retail, a brand more than a merchant. But other store owners also have the strength to entice people away from Amazon and make them go out shopping. Apple has convening power, as do some luxury brands, grocery stores and restaurants.

The old mall is not returning, even if more families move out of cities — it was too big and bland. Some will be torn down and parts of the others converted to distribution centres for online retailers. Something smaller and quirkier is needed, perhaps closer to town, even reachable on foot.

The shopping centre of the future will not be Gruen’s mall — it could be more like a high street or the ornate arcade he once imagined re-creating. But when people are allowed to gather freely again, they will come.