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J.C. Penney Shops for Lenders, Hawks Real Estate

Cushman & Wakefield audits put value of owned and ground-leased stores and other facilities at over $4 billion.

J.C. Penney Co. Inc. Tuesday showed off its “profitable growth plan” — and its more than $4 billion real estate portfolio — in a presentation to the lenders it hopes will back its $1.75 billion in loan financing.

This story first appeared in the May 15, 2013 issue of WWD.  Subscribe Today.

The prospective lenders were told that Penney’s hopes to combine a “return to promotional pricing strategy” with elements of what was started by departed chief executive officer Ron Johnson, including “inspirational in-store presentation on [an] enhanced merchandise assortment” and the rollout of 505 home stores set to launch June 6.

In 2013, the company said, it plans to “deliver effective marketing and promotion to increase core customer visits and spend” and refine its merchandise strategy to “focus on private label, national brands and attractions.”

The brand assortment presented to the lenders included labels brought in under Johnson, such as Joe Fresh; private-label merchandise being revived, such as St. John’s Bay, described as a “$1 billion-plus private brand; the Liz Claiborne brand, now owned by Penney’s, and stalwart national brands such as Levi’s.

The event was closed to the press and no transcript was provided. However, Penney’s disclosed contents of the presentation in a Form 8-K filed with the Securities and Exchange Commission.

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In-store priorities touched on by chief executive officer Myron “Mike” Ullman included being in stock on sought-after items and a wide range of sizes and reestablishing the retailer as the “fashion authority for moderate-customer lifestyle within their family budget.”

Executives described suppliers as “very supportive of forward-looking merchandise” and satisfied that new presentations are “meeting their increased expectations.”

Under the heading “new attractions differentiate [Penney’s] from Kohl’s and mass merchants,” the company noted that 8 million square feet of space were transformed last year and 10 million square feet are or will be under construction this year.

Penney’s noted that a series of Cushman & Wakefield appraisals put the value of owned and ground-leased stores at $3.3 billion, with an additional $762 million in value coming from owned distribution centers and the company’s headquarters in Plano, Tex., putting the total value of the portfolio at $4.06 billion. An estimate by Morgan Stanley last week had put the total figure nearly $2 billion higher.

In total, the company’s real estate portfolio consists of 306 owned stores, 123 ground-leased stores and 675 leased stores, for a total of 1,104 units, plus 15 distribution centers and its headquarters.

Earlier in the day, Penney’s said that it had extended the expiration date for the tender offer on its 7.125 percent notes one week to June 4 and the payout to $1,400 on principal of $1,000, up from $1,300. Additionally, holders who tender their notes by May 20 will receive an additional consent payment of $50 for each $1,000 of principal.

Penney has allocated $254 million of the $1.75 billion in financing to buy back the notes. The proposed term loan facility is secured by Penney’s real estate and “substantially all tangible and intangible assets of the company.”

Shares of Penney’s Tuesday rose 38 cents, or 2.1 percent, to $18.62.