J.C. Penney Closings Could Become a Critical Issue

[William Hull]

The "National Real Estate Investor" interviewed Edward Dittmer about how popular department store closings affect the malls and anchor stores. According to Morningstar, J.C. Penney is closing many of its own stores. Many department stores like J.C. Penny are located in class-b malls and when they leave it is hard to gain tenants to fill the vacancies. On occasion, sporting good and hobby stores will fill some vacancies but usually the owners of the mall are hard pressed and need to sell their malls. With J.C. Penney closing it's a matter of seven point twenty-nine billion in CMBS debt and decreasing sales. This in turn, leads to some bond holders losing one hundred percent of their liquidations and assets. It is not feasible to hold onto the business property. Some malls can continue with a steady cash flow if there is an eighty percent capacity. However, in the example of St. Louis Mills which once thrived as a one hundred and forty-two million dollar property; it plummeted to the market value of four point four million. The investors that buys mall properties at these low appraised prices may redevelop or make open-air shopping centers. Although, in the case of the St. Louis Mills mall it was demolished and developed. In other cases, malls could remain open or re-used to retain the asset.

Key Takeaways:

• With department stores closing locations malls are losing their anchor stores.
• If anchor stores close, malls may have problems filling space and retaining other tenants.
• Some malls will have to function at a lower level revenue; some will become vacant.

"Consider J.C. Penney. The department store chain recently announced 140 upcoming store closings, but could end up closing more locations, CNBC reports."

Read more: http://nreionline.com/cmbs/jc-penney-closings-could-become-critical-issue-lower-quality-malls