This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

J.C. Penney's Feet to the Fire

When "leases run for an extended period of time, while it's not ownership, it's a tremendous amount of control on the part of the store for a long time," Lachance said.

But to place a value on mall holdings is tricky, he said. In the Sears example, the chain got $200 million out of $270 million for one box in the Ala Moana mall in Honolulu, which is one of the most productive U.S. malls. On the other hand, for a location in the Woodlands Mall in Houston, Sears got $15 million, Lachance said.

Green Street's analysis of J.C. Penney locations is a bell curve of sorts, with 24% of the stores in "A" grade level malls, fully half in "B" grade level malls, and 24% in "C" and "D" grade level malls.

The possibility of putting the store's property into a REIT isn't one that analysts are going for either. Lachance, for one, said that wouldn't provide the company with enough value. The issue for that type of structure is that it would be a single tenant REIT and there are credit quality issues, Lachance said. "If you're J.C. Penney REIT, credit concentration is a legitimate risk, especially given the credit quality. It's not going to trade like Simon Property Group, for example."

Yet he also credits Ackman's long history of successful investing in real estate. But with Vornado Realty Trust partially exiting its investment -- it sold down its more than 10% stake to a little more than 6% last month -- it could be seen as a vote of no confidence for a real estate solution.

Eventually, Lachance said, "as J.C. Penney seeks to create cash to implement their vision, we will see sales [of real property assets].

Karabus said that J.C. Penney would be better off selling 25% its poorest locations or worst-performing stores. That would not only give it ready cash, but would also allow it to focus on turning around its better locations.

Meanwhile, some debtholders have already proved themselves to be a restive bunch as they wait for the cash to show up. Not only is the company debt load just south of $3 billion, but there are covenants tied to a chunk of that debt.
4 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
JCP $8.30 0.00%
MSO $6.00 0.00%
SHLD $20.50 0.00%
TGT $72.89 0.00%
WMT $59.92 0.00%


Chart of I:DJI
DOW 17,812.19 +19.51 0.11%
S&P 500 2,089.14 +2.55 0.12%
NASDAQ 5,102.8080 +0.33 0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs