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May 8, 2023 : According to Simon Property Group CEO David Simon, J.C. Penney, the struggling department store that suffered year-on-year declines in 2022 and declared bankruptcy in 2020 has been showing signs of progress. He said on Tuesday during a conference call that the retailer has “found its mojo,” citing investments to improve stores and create beauty spaces, which Sephora previously occupied before it partnered with Kohls. Simon added that J.C. Penney is attracting better brands and experiencing growth in beauty. However, he said these investments have been affecting the company’s earnings and Simon’s results. Transaction costs associated with J.C. Penney’s beauty initiative dragged the REIT’s funds from operations in Q1.
Simon and Brookfield bought J.C. Penney out of bankruptcy in 2020, and the brand management firm Authentic Brands Group recently acquired a 16% stake. J.C. Penney has been generating funds for its owners through lease agreements, maintenance, and other fees. Simon Property Group has received $25 million from J.C. Penney for the past two years, while Brookfield Asset Management has received $27 million in 2022 and $28 million in 2021, according to a recent filing with the SEC.
In addition, J.C. Penney paid Simon $1 million for assistance with debt refinancing and paid Simon, Brookfield, and ABG employees $600,000 for serving on its board. Meanwhile, J.C. Penney’s fees paid to Authentic Brands Group rose 36.6% to $5.6 million last year. The retailer has an agreement with ABG to purchase its licensed products, including collections from Forever 21, Sports Illustrated, and Marilyn Monroe. Despite the challenges, Simon is optimistic about J.C. Penney’s prospects, stating that the company is moving in the right direction.
