Mall Owners Simon, Brookfield Property Jump In To Save JC Penney

Mall owners Simon Property Group SPG and Brookfield Property Partners BPY are close to acquiring mall retailer J C Penney Company Inc JCPNQ and its 650 stores.

What Happened: A J.C. Penney lawyer, according to Reuters, says there is a non-binding letter of intent with the two mall operators for $800 million. The deal would close in early October, pending court approval.

The two mall owners will pay $300 million in cash and assume $500 million in debt. Wells Fargo & Co WFC will give a $2 billion revolving credit to J.C. Penney once the deal is completed.

Current J.C. Penney lenders will own some stores and distribution centers through two different REITs.

Why It’s Important: J.C. Penney filed for Chapter 11 bankruptcy in May with 850 locations and annual revenue of $10.7 billion.

The mall owners are rumored to have made the deal to prevent empty department stores that can trigger co-tenancy clauses for their mall tenants to re-negotiate lease terms or vacate. The two owners also can repurpose real estate how they see fit.

Price Action: Simon Property Group and Brookfield Property Partners shares are down 53% and 40%, respectively, in 2020. J.C. Penney's stock was up 108% to 40 cents a share on news of the deal.

Photo credit: Miosotis Jade via Wikimedia Commons