Owning a business is not easy, and many businesses need help along the way. This is especially true now more than ever to have help when hard times and contract disputes arise as a result. One such example of creative contract dispute resolutions, is a recent proposal by the landlords of J.C. Penney to purchase the business.
The proposal is for JCP’s landlords, Simon Property Group and Brookfield Property Partners, to purchase JCP, and then continue running the store. This will save two-thirds of JCP’s locations (leaving about 600 stores) and over 70,000 jobs across the U.S.
The resulting value with be nearly $2 billion, which will include a $300 million cash infusion from the two entities and them loaning JCP about $500 million. This will allow JCP to leave bankruptcy with about $1 billion in cash.
Creative contract dispute resolution
SPG and BPP own most malls across the country, and as a result, they are JCP’s primary landlords. SPG and BPP have also seen 40 other retailers file bankruptcy as shoppers have moved to mostly online shopping. This means that these landlords are faced with contractual disputes over broken leases and potentially losing hundreds of millions of dollars in lost revenue and empty mall space that only further devalues their assets as foot traffic will slow as their malls lose their anchor retailors. This solution not only saves JCP, but also could potentially, help save SPG and BPP as well because they can maintain their cash flow and avoid further litigation over broken leases and contractual obligations.
Other mall owners have also taken to this strategy to help weather our current financial times. In fact, Authentic Brands Group and SPG already agreed to purchase Brooks Brothers for $325 million earlier in the year.
What we can learn from this transaction
Oregon small businesses want to avoid and, when needed resolve contractual disputes quickly. This avoids spending money on legal fees and allows normal business operations to resume. Often, when these contractual disputes arise though, the focus can become punitive and discussions can revolve sole on the monetary aspects of a broken aspect. Nonetheless, these mall deals show that there is often creative solutions to solving these issues.
This is why the help of an attorney early in a dispute or even in the contract drafting initially can be so important. Sometimes, it is this third-party that can see the entire situation and suggest these types of creative solutions.