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Two real estate investors take over the bankrupt US department store chain JCPenney. They hope to secure the future of their indoor shopping centres, but this reasoning meets with a certain amount of scepticism…
Out of self-interest
JCPenney has entered into a sales agreement for its retail activities with two covered shopping centre operators: Simon Property Group and Brookfield Property Partners. They are paying 300 million dollars (250 million euros) in cash and 500 million dollars (420 million euros) in debt and plan to consolidate the retailer’s real estate into a separate company.
This takeover avoids a dramatic bankruptcy: indeed, JCPenney is a major player in the sector: 12 billion dollars (10 billion euros) in turnover, 850 stores and 85,000 employees, of whom 70,000 will probably be able to keep their jobs. However, this is not the main reason for Simon and Brookfield’s takeover of the chain: they are mainly acting out of self-interest. JCPenney is a major tenant in their indoor shopping centres and a bankruptcy of the chain that would result in the closure of all the stores would be a major blow to real estate investors.
Amazon as a saviour?
A logical reasoning, but one that is also subject to criticism: although JCPenney has been an emblematic brand in the United States since 1902, the chain has been making a loss for years. The various restructurings and strategic repositionings have hardly improved the situation. As a result, the real estate investors find themselves with an outdated retailer in their shopping centres. A retailer who, as a anchor tenant, also pays relatively low rents.
For Bloomberg this is a missed opportunity: shopping centre owners should make more appropriate use of their premises in order to survive after the pandemic. This requires creativity, but there are options: Amazon recently unveiled plans to transform vacant retail space in shopping centres into distribution centres (known as “dark stores”) and pick-up points. The e-commerce giant would thus give shopping centres a new lease of life. The online retailer had already been in negotiations with Simon Property Group in this regard, but the real estate investor is now choosing to take a different route.
