JCPenney’s real estate portfolio could be the struggling retailer’s messiah

JCPenney’s vast kitty of real estate holdings may be the financially embattled company’s saving grace, Bloomberg Businessweek reported.

The last year has been a miserable one for the once-revered retailer, with sales declining 25 percent and the stock price plummeting 50 percent. And on Monday, the company’s chief executive officer Ron Johnson was ousted. But through the turmoil, the company has managed to hold a large amount of prime real estate at an extremely low cost, due to its advantageous leases.

JCPenney’s average cost of ownership for space is less than $5 per square foot, compared to about $70 per square foot for similar space, according to a recent analysis by International Strategy & Investment Group seen by Businessweek. If the real estate that houses JCPenney’s top 300 stores could be spun off as a real estate investment trust, the REIT would command a value of about $40 per share, more than six times the estimated share value of the remaining 800-store retail chain, the ISS analysis added.

The fallout from JCPenney’s failure has been felt among top New York-focused REITs such as Vornado Realty Trust, as The Real Deal reported. Vornado recently announced a $224.9 loss on its 10.7 percent stake in the retailer. [Bloomberg Businessweek]  –Hiten Samtani