I haven’t heard mention of any buyout discussions at this time. If they can get their debt under better control (we will see how they do in the coming days) then that may be a possibility in the future for three reasons:
Real Estate Assets:
I have not taken a deep dive into JCPenney’s real estate holdings; however, many department stores have been a real estate play for the last several years. These companies have been able to unlock billions of dollars by selling flagship retail space.
Hudson’s Bay Company sold its Fifth Avenue Lord and Taylor Flagship store to WeWork for $850 million USD. Real estate divestures provide these non solvent companies a lot of liquidity. I do not believe JCP has amassed the type of prime real estate that Hudson’s Bay Company and Macy’s have; however, it certainly helps their candidacy to potential buyers.
Retailers who have built reputable private label brands usually have unrealized market value. Sears sold it’s Craftsman brand to Stanley Black & Decker for nearly $900 million USD.
These types of assets are rarely factored into the market capitalization; however, once liquidated, the injection in cash can be seen as a life preserver for the company.
Mall Owners Lease Agreement Obligations:
JCPenney anchors hundreds of shopping malls across the United States. Because of their ability to draw customers to the mall, other mall tenants are guaranteed major anchor stores in the mall, by the landlord:
“JC Penney JCP can stay out of bankruptcy if aided by mall owners. I pointed out that mall covenants with smaller tenants promise two anchor stores in their leases. It is unlikely that mall owners want to renegotiate these leases because of the absence of a major anchor store like JCPenney.
On February 19, 2020 Authentic Brands Group (ABG), Simon Property Group SPG (Simon) and Brookfield Property Partners (Brookfield), jointly announced the acquisition of Forever 21, a fashion retailer. It is a brand that is in many malls and the stores throughout the United States and overseas. Headquartered in Los Angeles, the company focuses on Gen Z audiences. The acquisition saved that company.”
If landlords feel the cost to buy JCP is less than that of potentially losing thousands of tenants and finding themselves in legal battles, perhaps they will take over JCP in a joint partnership like they did with Forever 21.
Toronto - Does JCP own or lease most all of their retail store locations? Many are in place within malls owned by Simon Prop Group, etc.....although I do know that there are some free standing stores. I wish that I knew what significance this has, if any. An unsolved piece of the puzzle in my mind.
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