2nd UPDATE: J.C. Penney Gets $248 Million for Two Million Units of Simon

-Stock is up 1.4% in down market

-Units convenient target for cash

-J.C. Penney will hold 205,000 in Simon unit after deal

(Adds details on the deal in the third paragraph, and updates stock price.)

By A.D. Pruitt and Tess Stynes

In a drive to raise cash, J.C. Penney Co. (JCP) has picked some low-hanging fruit by selling a long-held investment in shopping-mall landlord Simon Property Group Inc. (SPG) for $248 million.

The retailer disclosed Monday that Simon Property, the nation's largest shopping-mall owner, redeemed two million units representing limited-partner interests in a Simon subsidiary for $248 million.

J.C. Penney received the units at the time of Simon Property's initial public offering in 1993 as part of joint-venture investments the companies made together in several malls. At the time, the units could be converted into cash or stock at Simon's discretion. The company agreed to redeem the units at a discount.

The deal came as J.C. Penney is in the midst of a vast transformation effort led by Chief Executive Ron Johnson to make it more competitive with rivals such as Macy's Inc. (M) and Kohl's Corp. (KSS).

J.C. Penney Chief Financial Officer Ken Hannah said Monday that the retailer last year determined it was necessary to review and, where appropriate, monetize assets that aren't core to its operations, adding that Monday's move represents the first step toward executing this plan.

"They're monetizing assets just when cash flows look like they're going to get cut," said Paul Swinand, an analyst at Morningstar Inc.

J.C. Penney shares were recently up 1% at $20.81.

In May, J.C. Penney reported that it swung to a $163 million loss in the first quarter, leading the chain to eliminate its dividend and raising questions about Mr. Johnson's strategy of cutting discounts in favor of offering generally lower prices at all times.

The company is set to release its second-quarter financial report Aug. 10.

After the transaction is complete, J.C. Penney's real-estate unit will hold about 205,000 limited partnership units in the mall-focused real-estate investment trust's operating partnership.

According to a regulatory filing in March, J.C. Penney said it owned shares in two other retail REITs: 1.895 million shares in CBL & Associates Properties Inc. (CBL) and 89,063 shares in Ramco-Gershenson Properties Trust (RPT).

Write to A.D. Pruitt at [e-mail] and Tess Stynes at

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