JC Penny was in the news for so long after the legal challenge to it’s website’s alleged blacklisting, but seems to have recovered overall.I live in a small retirement town in Southern California. During the economic meltdown that began in 2006, many of our retail stores folded. One of the few that survived was good ole J.C. Penney.
Now we hear the chain is in trouble. James E. Ellis tells the story in his piece posted on Bloomberg Business Week under the title; “Will J.C. Penney’s Real Estate Be Its Savior?” posted April 09, 2013.
Ellis says that J.C. Penney’s sustained a 25 percent sales turn down in 2012 and its share price fell nearly 50 percent in the last year. But the retail stalwart has big resources; namely its real estate, he reports.
J.C. Penney’s Has Big Real Estate Resources
Ellis cites the store’s “large amount of low-cost real estate space it owns or controls via advantageous leases.” He says that “Penney has an average cost of ownership for much of its real estate of less than $5 a square foot. An analysis last month by International Strategy & Investment Group said that much of the space inside malls around J.C. Penney stores was going for about $70 a square foot today.”
Here’s the real eye-popper that Ellis references from an analysis last month by International Strategy & Investment Group.
The research they did indicated that the space inside malls around J.C. Penney stores was going for roughly $70 a square foot. Ellis notes that “ISS said that if just the real estate that houses the top 300 J.C. Penney stores could be spun off into a separately traded real estate investment trust, that REIT would have an enterprise value of about $40 a share—more than six times its estimate of the share value of the remaining 800-store J.C. Penney retail chain.”
So hopefully our dilapidated old neighborhood store here in southern California, will survive. It is good to see real estate is finally making a comeback after the last painful bubble. For those of us who lost money in that major popping, it was a great life lesson indeed not to blindly speculate. Trust in your own common sense and live within your means if at all possible.