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One of the rationalizations used for JC Penney is that they are essentially a REIT with all of their stores. This is similar to the argument used to justify the Sears buyout a few years ago. The theory is that the properties are worth more than the retail operations. This assumes that someone else would pay top dollar for the properties.

Simon Property is the largest mall operator in the US. They just announced they have no interest in buying the JC Penney stores and leasing them back. From Reuters:

Simon Property Group Inc (SPG.N), the largest owner of U.S. malls, has little interest in buying department store space from retailers and leasing it back, a senior executive said on Friday, a stance that may limit options for cash-strapped J.C. Penney Co Inc (JCP.N).

Penney, which has 111 stores in Simon malls across the country, has been talking with its financial advisers about ways to raise capital after a botched turnaround that led to a steep sales slump. Sale-leasebacks may be one of those options, analysts have said.

"I do not believe we believe we would be interested in sale-leasebacks," Richard Sokolov, president of the real estate investment trust, said during a conference call when analysts asked him about the company's general position on the subject.

Simon may have little reason to be interested.

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