HARLINGEN — Reports of the end of 118-year-old department store icon JC Penney, which filed for bankruptcy in May and seemed dead in the water as a company, may have been premature.
In an unusual if not unprecedented move, mall owners Simon Property Group and Brookfield Property Group, both of which are real estate investments trusts, have announced a deal to buy the troubled retailer out of bankruptcy for $1.75 billion, the companies say.
The move makes business sense for the mall investors, which will now retain the Penney’s anchor stores at their properties when so many major retailers have abandoned malls via bankruptcies or by shifting to stand-alone locations.
It may well be a lifeline for Valle Vista mall, which already has lost anchor tenants Forever 21 and Sears. If the deal is consummated, it also will save the jobs of 70,000 JC Penney workers.
“They still have a name, they still attract buyers, and I think it’s a good thing all around,” Felix Reznick, one of three partners in Kohan Retail Investment Group, which owns Valle Vista, said Thursday.
“Not only them, but a lot of iconic names are being bought, Brooks Brothers and a whole bunch of others,” he added. “People see value in this retail. It’s only a good thing for us.”
The tentative pact was announced Wednesday by Penney’s lawyer Josh Sussberg during a brief hearing in bankruptcy court.
In a statement, the companies said they intend to acquire “substantially all of JCPenney’s retail and operating assets” for $1.75 billion with a combination of cash and debt.
At Valle Vista, the loss of JC Penney could have had an even bigger impact than Forever 21 and Sears leaving.
“JC Penney is the main anchor that is still there at Valle Vista mall, and anything that happens in a positive light that keeps them there for a longer time is great,” Raudel Garza, chief executive officer of the Harlingen Economic Development Corp., said Thursday.
Penney’s performance had been poor for years prior to the hit the company, like so many, has taken due to COVID-19 shutdowns and shoppers staying home or buying online.
The retailer’s last profitable year was 2010, and it has been closing dozens of stores to trim expenses. When it filed for bankruptcy in May, Penney’s operated around 800 stores.
Simon Property Group is the biggest mall owner in the U.S. with 77 retail properties, 21 of them in Texas, including La Plaza Mall in McAllen and Rio Grande Valley Premium Outlets in Mercedes. Brookfield owns some malls but is a diversified company that holds a number of other properties as well.
“It’s unusual, but at the same time, the property owners are taking control of the tenants and making sure that the stores stay open,” Garza said. “Obviously, Simon and Brookfield both have assets throughout the country, and JC Penney is in a lot of their properties, and it would be a big hit to them if JC Penney decided to close down completely. It’s good news, I think, for everybody who is looking at trying to keep the doors open.”
“I know that Valle Vista mall owners have started to pay attention, just maybe we’re squeaking enough that they are paying more attention to the mall, and hopefully they get some good tenants in,” Garza added. “There’s some activity on the other side of Valle Vista mall that hopefully will bring in a lot more new developments, new retail stores, and maybe even some mixed-uses.”
Reznick said Valle Vista is in negotiations with two tenants he hopes will sign leases with the mall within the next month.
“We’re very close. Hopefully, at least one of them gets signed next week and another one in a week or two, and we’ll have two sizeable new tenants,” Reznick said.
“Once they get signed, we can publicly announce who the tenants are,” he added.