J.C Penney (JCP) is working to free itself from the sweet embrace of Pershing Square and Vorando Realty which disclosed on Oct 8, 2010 respective holdings of 16.5% and 9.9%. The two private equity companies are working to unlock value. This is were Vorando Realty comes into play. They want to realize the full value of JC Penney’s real estate.
JC Penney sits on top of billions of dollars worth of land and buildings. The narrative states JC Penney does not know how to manage real estate. Vorando knows better. JC Penney needs real estate as an inexpensive cost input. Real estate is where they display their inventory until consumers come in with cash. What will Vorando do for the JC Penney shareholder in the long term? Higher rents and occupancy costs as real estate value is unlocked.
JC Penney can set up their own REIT with someone other than Vorando and unlock the value themselves. Or they can keep their cost inputs down and remain as merchants which is what they really are all about. Pershing talks a great story about governance. Where is the governance of huge rent cheques payable to Vorando Realty?
Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post.
- Vornado Realty Trust Announces Investment in J.C. Penney (eon.businesswire.com)
- J.C. Penney Shares Surge After Pershing Square Buys 16.5% Stake (dailyfinance.com)
- Penney Hires Goldman for Defense Against Ackman (dealbook.blogs.nytimes.com)
- J.C. Penney Parries Ackman With Poison Pill (observer.com)