storewanderer wrote: ↑May 14th, 2024, 12:21 am
ClownLoach wrote: ↑May 13th, 2024, 8:52 pm
JCPenney is spending $1 Billion on store refreshes and remodels to improve their shopping experience according to Brookfield.
I doubt any department store chain has made a comparable investment in years.
Also doubt it will be enough to address all the deferred repairs.
It will be interesting to see if the money all goes to deferred repairs (perhaps to help get the buildings ready for other potential tenants).
These JCP Stores seem to be in really bad condition and/or extremely outdated inside.
I feel like slowly Macy's is dealing with the poor condition stores through its store closure program. Very slowly.
I don't think a billion dollars is nearly enough to repair all the problems, but if applied carefully it could cover up a lot of issues. Hence the simple exterior paint jobs, reported mass installation of carpet, etc. Just painting everything inside and out could be a couple hundred thousand per store with a large contract discount based on the wall conditions in some stores. I think if they just move to uniform carpet, floors and paint it will improve the quality of appearance quickly since there is now a mosh-mash of leftover weird flooring types, paint, specialty lighting and more from the failed Johnson era. Then get some decent way finding signage that enhances the appearance of the stores. The fresh paint, carpet and signage could go a long way, but I wonder how many stores also need new HVAC, new doors, new escalators and elevators, new restrooms, and other more expensive jobs. And I would imagine the employee side of things is much worse than the customer side. I could easily see another billion in such projects because of the size of these facilities and the neglected conditions they're in.
There is a myth about getting things ready for others that I hear pop up elsewhere. GAAP would not allow for such work based on the way retailers write off the costs of depreciation over decades. It would create a large "balloon" type charge that goes on the books if the store is closed. If they replace the HVAC, they're intending to stay there for decades and write it off over that time period as a capital expense. Plus who would want anything that looks or works logistically like a JCPenney? I think the most likely candidates for converting to other uses for these chains have already been vacated and repurposed. If they were to exit they would most likely be demolished entirely since most of these department stores have so much wasted space behind walls that are in many cases structural in nature and reduce the options to a builder to maximize the space. I do not think JCP is quite as bad as many Macy's buildings when it comes to random empty stock rooms and offices between the exterior walls and sales floor, but there is probably still tens of thousands of square feet that are stuck behind those walls and not usable. That limits the ability to monetize the space to its fullest and in combination with weird basement logistics and freight elevators will usually push the building to a full demolition if vacated in a quality mall that can fully re-tenant the space/land. And based on the current strategy being pushed by Brookfield and Simon (their primary owners) most of these department store spaces that are vacated are being demolished and replaced by 300 to 400 units of apartments. Nobody is "preparing for other tenants" and I believe this JCPenney work is to prepare for an IPO so that these mall owners can turn a profit on their rescue where they basically bought it for nothing to save themselves. Now that they've most likely churned all their inside leases and nobody is going to get a 95% rent reduction if JCPenney or Macy's close, do they really need to own it anymore?
