JCPenney Credit Rating & NNN Status

What Happened to JCPenney?

JCPenney, one of America’s oldest and most recognizable department store chains, filed for Chapter 11 bankruptcy on May 15, 2020 — the largest retail bankruptcy filing of the COVID-19 pandemic period. Founded in 1902 by James Cash Penney in Kemmerer, Wyoming, the company had operated for 118 years before the combination of years of declining sales, excessive debt, and pandemic store closures made reorganization unavoidable.

Unlike Sears or Toys “R” Us, JCPenney did not liquidate entirely. In December 2020, Simon Property Group (the largest US mall REIT) and Brookfield Asset Management jointly acquired JCPenney’s retail operations and inventory through the bankruptcy process for approximately $1.75 billion, preserving approximately 650 stores and 70,000 jobs. The reorganized company operates as Penney OpCo LLC — a private entity with no public credit rating. The real estate assets were separately acquired by a joint venture between the same parties.

JCPenney / Penney OpCo Credit Profile

JCPenney NNN Real Estate: The Ownership Complexity

JCPenney’s post-bankruptcy real estate structure is significantly more complex than a standard NNN investment. The company has historically been an anchor tenant in enclosed malls — typically owning its own store building while leasing the land from the mall REIT — rather than a freestanding NNN tenant in the traditional sense. Genuine freestanding JCPenney NNN properties do exist but represent a smaller subset of the overall portfolio, primarily in strip center and power center formats in secondary and tertiary markets.

For investors encountering JCPenney in a NNN context, the key due diligence questions are: (1) Is this a genuine NNN lease with JCPenney/Penney OpCo as the guarantor, or an anchor lease structure within a mall? (2) What are the remaining lease term and renewal options? (3) Is the specific location in the post-bankruptcy retained store set, or was it closed and the lease rejected? (4) What are the re-tenanting prospects if JCPenney ultimately exits?

Former JCPenney Properties: Re-Tenanting Reality

The approximately 200 store closures during and after the bankruptcy created significant re-tenanting opportunity and challenge across the country. Large-format department store boxes of 60,000 to 120,000 square feet in secondary and tertiary market malls have proven the most difficult to re-tenant. Successful re-tenanting outcomes have included fitness operators, healthcare systems converting to outpatient facilities, grocery conversions in markets underserved by grocery, discount retailers (Burlington, Ross, Five Below combinations), entertainment concepts, and government/education uses.

JCPenney NNN Investment: Key Considerations