Legal Battle Over J.C. Penney Store Sale Heats Up
A significant legal dispute has emerged surrounding the planned sale of over 100 J.C. Penney stores, with Onyx Partners claiming that Copper Property Trust intentionally derailed the deal to pursue better offers. This high-stakes lawsuit was filed recently in Manhattan Supreme Court.
Onyx alleges that Copper breached their contract and acted in bad faith. Initially, a $947 million agreement was in place, but the buyer contends that Copper secretly arranged to sell the properties elsewhere and stymied the deal by not providing necessary tenant estoppel certificates.
According to the lawsuit, Copper was unable to obtain a “clean” estoppel certificate—a crucial document wherein the tenant, in this case, J.C. Penney, affirms key lease terms—claiming this as a reason to stifle the sale.
Onyx claims that after issuing a “dirty” estoppel certificate indicating lease violations by the landlord, Copper did not extend the termination deadline, which they had previously done. Onyx argues that the situation was manipulated by Copper to negate the contract.
Moreover, the lawsuit states that during the pre-closing period, Copper marketed the properties to other buyers, misleading them about the portfolio’s actual value and violating a no-shop clause that was part of their agreement.
Onyx invested millions preparing for the sale, including obtaining financing and entering into forward sales agreements, only to find themselves without a deal as Copper refused to address issues or finalize the agreement.
The company is seeking a court order to compel the trust to complete the sale as initially planned. If that doesn’t happen, Onyx is asking for at least $200 million in damages, turning this real estate venture into a courtroom issue filled with claims of bad faith.
The backdrop to this situation is J.C. Penney’s Chapter 11 bankruptcy declared in 2020, which led to the formation of Copper Property CTL Pass Through Trust to manage and sell the retailer’s real estate.
In July, it was reported that Copper had agreed to the $947 million all-cash transaction with Boston-based Onyx Partners, with plans to finalize the sale in September. However, the deadline was later postponed amid efforts to meet court-mandated liquidation conditions.
As the deal faltered, some investors in the trust raised concerns about the lower price per store compared to earlier property sales, despite assurances from executives regarding the urgency of concluding the sale.
Officially, the trust stated last week that the deal was void because it didn’t close by the designated deadline. With the bankruptcy pushing the trust to seek out another buyer before a January 30, 2026 liquidation deadline, J.C. Penney continues to operate the stores as a tenant.
In a statement, Catalyst Brands, the parent company of J.C. Penney, remarked that any potential transaction between Copper and Onyx would be essentially a transfer of interests back to J.C. Penney as the landlord. They assured that the operations at all 119 stores would remain unaffected and continue serving their communities.
