J.C. Penney Purchased by Pair of Mall Operators

J.C. Penney reached an agreement yesterday to sell its retail business to mall operators Simon Property Group and Brookfield Property Partners, averting a total liquidation. Simon and Brookfield will pay about $300 million in cash and assume $500 million in debt to buy J.C. Penney, lawyers for the retailer said at a Bankruptcy Court hearing. The deal will split J.C. Penney into separate companies, with Simon and Brookfield running the retail business and its creditors owning a portion of its real estate. In all, the deal values J.C. Penney at $1.75 billion, including the funds committed to support its business after it emerges from bankruptcy.

Total Retail's Take: We once again are seeing mall operators, in this case Simon and Brookfield, purchasing a retail business as they seek to minimize storefront vacancies at their properties. In the case of J.C. Penney, it was one of the first national retailers — and the biggest — to file for bankruptcy during the coronavirus pandemic. It entered bankruptcy with $10.7 billion in annual sales, about 85,000 employees and nearly 850 locations, many of them anchor stores at malls around the country. If Simon and Brookfield had not emerged as buyers, it was likely that J.C. Penney was headed for liquidation. The deal provides a path forward for J.C. Penney, albeit in a challenging environment, especially for mall-based department stores struggling to get cautious consumers back into brick-and-mortar locations, while offering Simon and Brookfield a tenant that will hopefully attract shoppers to its properties.