Simon Property Group and Brookfield Property Partners' interestin saving JCPenney, which filed for bankruptcy last month, has beenwell documented after being first reported by The Wall StreetJournal.

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This potential move makes a lot of sense, according to EricRapkin, the chair of Akerman's Real Estate practice group. JCPenneyis one of Simon's top anchor tenants. By controlling thedepartment-store chain, the mall owner can keep its anchor tenantand maintain occupancy since smaller retailers depend on largertenants to drive foot traffic.

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"I don't think this will be a land rush for real estate ownersto buy up their tenants who are going under," Rapkin says. "But incertain situations where the retailer makes up a significantportion of a mall owner's portfolio, and you can acquire them [theretailer] at a very attractive price in bankruptcy, there are a lotof good reasons to do it."

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By acquiring the anchor store, landlords don't have to negotiatewith a new owner.

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"You've kept the rent flowing," Rapkin says. "You're alsocontrolling the real estate [occupied by the anchor tenant] asopposed to someone else buying it."

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The ability to control the anchor tenant also has a trickle-downeffect on smaller stores in the mall.

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"If the anchor tenant is not open and operating some of thoseother tenants might have the ability to get their rent reduced ormaybe terminate their lease," Rapkin says.

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Buying the anchor tenant also gives the mall owners options downthe road if they want to redevelop their property.

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"There are issues that you may have in those [anchor tenant]leases that you wouldn't have with some of the smaller retailers,"Rapkin says. A company like JCPenney, depending on when they cameinto the mall, could have some pretty restrictive REA's [ReciprocalEasement Agreements] that could be a stumbling block if you wantedto redevelop something."

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As an example, Rapkin points to Lerner Enterprises and The TowerCos.'s experience at the White Flint Mall in Bethesda, Md. When thelandlords started demolishing the property, Lord & Taylor,whose building sat next to the mall, sued. In the original 1975agreement, the mall owners were to maintain White Flint as a"first-class" mall, according to Bethesda Magazine. The argumentwent that terminating leases and demolishing the property made itdifficult to maintain a "first-class" mall.

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A federal district court jury produced a $31 million verdict infavor of Lord & Taylor in August 2015. The Fourth Circuit Courtof Appeals upheld that judgment in 2017, according to BethesdaMagazine.

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"Lord & Taylor won a very large judgment because the mallowner needed the anchor's approval to demolish the mall and makechanges that the anchor would not go along with it," Rapkin says."They went ahead and started demolishing anyway. They rolled thedice, and Lord & Taylor took them to court and won."

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Leslie Shaver

Les Shaver has been covering commercial and residential real estate for almost 20 years. His work has appeared in Multifamily Executive, Builder, units, Arlington Magazine in addition to GlobeSt.com and Real Estate Forum.