A few weeks ago, top U.S. mall owners Simon Property Group (NYSE: SPG) and Brookfield Property Partners (NASDAQ: BPY) seemed to be closing in on a deal to buy J.C. Penney (OTC: JCPN.Q) out of bankruptcy. While retail-focused private equity firm Sycamore Partners had offered a slightly higher cash bid than the consortium led by Simon and Brookfield, the mall owners' willingness to offer lease concessions appeared to be a trump card.
Unfortunately, negotiations hit a snag last weekend. As a result, J.C. Penney is turning its attention to hammering out a credit bid, under which its lenders would use their debt claims to buy the company. However, the risk of liquidation is rising with every day that the retailer remains in limbo.
JCPenney stores anchor dozens of malls for both Simon and Brookfield, giving both real estate titans a big stake in the company's survival. That made them the most likely buyers -- and up until last weekend, they were on track to rescue the ailing department store chain.