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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.
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