Photo: J.C. Penney
J.C. Penney has entered into a purchase agreement with Brookfield Property Partners and Simon Property Group and a group of first lien lenders to acquire the company’s assets. The department store retailer said it expects the deal to be finalized before the holidays, allowing it to operate under new ownership outside of Chapter 11.
Under the terms of the deal, Brookfield and Simon take ownership of “substantially all” of Penney’s operating and retail assets. The first lien lenders will acquire all of Penney’s distribution centers and 160 of its real estate assets. Penney’s new owners have reached agreement with the lenders on master leases for the properties and distribution centers acquired by the lenders.
“This transaction is a testament to the thousands of dedicated employees who have been working incredibly hard over the last several months under difficult circumstances,” said Penney CEO Jill Soltau in a statement. “Our customers are at the heart of JCPenney and we look forward to serving them under the JCPenney banner for decades to come. Our team remains laser focused on implementing our Plan for Renewal to offer compelling merchandise, drive traffic, deliver an engaging experience, fuel growth and build a results-minded culture.”
Penney’s new owners are counting on Ms. Soltau and the executive team she has put together to help the chain return to the path of profitable growth. The department store issued a press release back in May saying that it “had meaningful progress” toward achieving its goals and have either met or exceeded guidance on all five of its financial objectives for 2019. Prior to its business being disrupted by the novel coronavirus pandemic, Penney reported that it had achieved improvements in same-store performance in six of its eight merchandise divisions.
It remains to be seen whether Penney will continue to substantially reduce its store count going forward, although many expect that Brookfield and Simon will not follow that strategy aggressively, particularly when it comes to properties that each operates. Penney announced as part of its Chapter 11 filing in July that it planned to shutter 242 of its 846 stores.
Many have long contended that Penney’s core problem, along with many of its department store rivals, is that it has lost its relevance in the minds of many American consumers, particularly Millennials and Gen Z.
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