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viewpoints
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| less than a minute read

Addition by subtraction?

My observations about the risks associated with J.C. Penney's plan to spin-off its real estate were quoted in this article in National Real Estate Investor. Penney’s OpCo/PropCo reorganization has some advantages. However, its overall success depends on two unrelated variables in the current environment. One is whether the value of retail-dedicated real estate will decline or remain stable. The other is whether Penney's plan to resuscitate its brick-and-mortar retail will be successful.

The “risky” REIT plan might be a Band-Aid that wouldn’t do much to heal J.C. Penney’s retail wounds, notes Mike Venditto, a partner at Pittsburgh-based law firm Reed Smith LLP who specializes in corporate bankruptcies and related financial matters. The company’s debt is estimated at $3.7 billion, while same-store sales in the most recent fiscal year fell 7.7 percent.

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restructuring & insolvency