--Stock is up 1.4% in down market
--Units convenient target for cash
--J.C. Penney will hold 205,000 in Simon unit after deal
By A.D. Pruitt and Tess Stynes
In a drive to raise cash, J.C. Penney Co. (JCP) has picked off
some low-hanging fruit by selling a long-held investment in
shopping-mall landlord Simon Property Group Inc. (SPG) for $248
million.
The retailer disclosed Monday that Simon Property, the nation's
largest shopping-mall owner, redeemed two million units
representing limited-partner interests in a Simon subsidiary for
$248 million.
Analysts said J.C. Penney received the units, which can be
converted into stock, from Simon Property more than 20 years ago as
part of joint-venture investments the companies made together in
several malls.
The deal came as J.C. Penney is in the midst of a vast
transformation effort led by Chief Executive Ron Johnson to make it
more competitive with rivals such as Macy's Inc. (M) and Kohl's
Corp. (KSS).
J.C. Penney Chief Financial Officer Ken Hannah said Monday that
the retailer last year determined it was necessary to review and,
where appropriate, monetize assets that aren't core to its
operations, adding that Monday's move represents the first step
toward executing this plan.
"They're monetizing assets just when cash flows look like
they're going to get cut," said Paul Swinand, an analyst at
Morningstar Inc.
J.C. Penney shares were recently up 1.4% at $20.91.
In May, J.C. Penney reported that it swung to a $163 million
loss in the first quarter, leading the chain to eliminate its
dividend and raising questions about Mr. Johnson's strategy of
cutting discounts in favor of offering generally lower prices at
all times.
The company is set to release its second-quarter financial
report Aug. 10.
After the transaction is complete, J.C. Penney's real-estate
unit will hold about 205,000 limited partnership units in the
mall-focused real-estate investment trust's operating
partnership.
According to a regulatory filing in March, J.C. Penney said it
owned shares in two other retail REITs: 1.895 million shares in CBL
& Associates Properties Inc. (CBL) and 89,063 shares in
Ramco-Gershenson Properties Trust. (RPT).
Write to A.D. Pruitt at angela.pruitt@wsj.com and Tess Stynes at
tess.stynes@dowjones.com.
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