By Esther Fung

Simon Property Group Inc. is digging into its wallet to rescue another big tenant, a move that could help stabilize its mall business but one that raises new questions about the industry's longer-term viability, analysts say.

The biggest mall owner in the U.S. by number of malls is teaming up with Brookfield Property Partners, another large owner of shopping centers, in exploring a bid for J.C. Penney Co., according to a person familiar with the matter. The department-store chain filed for bankruptcy in May.

J.C. Penney is one of Simon's top anchor tenants, second only to Macy's Inc. Simon Property had 63 J.C. Penney stores as of the end of the first quarter, covering 10.2 million square feet and 5.6% of its space in U.S. properties. Brookfield has 99 J.C. Penney stores. The Plano, Texas-based chain operated around 850 department stores before it filed for bankruptcy.

If the two sides reach a deal, it would be Simon's third tenant acquisition in four years and its third partnering with Brookfield. The two property owners, in a consortium, purchased apparel retailers Forever 21 Inc. in February and Aéropostale Inc. in 2016.

While Simon Property said the investment in Aéropostale became profitable, analysts said the trend of buying distressed tenants to maintain occupancy isn't sustainable and is a worrying sign that property owners' rent-collection business model is under siege.

"They are doing this to keep the retailer alive, so that Wall Street doesn't see the trend of declining income," said Nick Egelanian, president of SiteWorks, a retail consulting firm. "The business model has been cracked for a long time."

Simon Property, Brookfield and J.C. Penney declined to comment. The retailer is currently reviewing funding options and will have to present a new business plan by mid-July, according to lawyers familiar with the proceedings.

Changing shopping habits, the growth of e-commerce, and now social distancing during the pandemic have crippled many retailers. It is still unclear how many shoppers will return to bricks-and-mortar stores, but retailers have said they have been compelled to shore up their online shopping platforms and to consider closing stores.

Landlords have seen rent collections drop during the second quarter as shoppers stayed away because of local lockdown orders. Simon and other property owners are also under immense pressure to keep vacancy rates from rising.

In previous earnings calls, Simon Property's chief executive officer, David Simon, said he made the investments in the retailers because he believed he could make money from them. "We make these investments for the sole purpose of 'we think there's a return on investment'," said Mr. Simon in a February earnings call.

Some investors noted that at a low-enough price, Simon and other investors can profit from buying distressed retailers and keeping those stores open.

Simon and its partners paid $81 million for Forever 21's e-commerce site and retail units, which typically had stores exceeding 10,000 square feet. That is larger than other specialty stores, making them harder to replace and giving Simon a bigger incentive to keep them around. After the Simon group took control, Forever 21 has continued to operate its e-commerce operations and kept hundreds of stores from closing.

As recently as last year's third quarter, Simon had 98 Forever 21 stores totaling 1.5 million square feet, making it one of Simon's top 10 tenants, according to one rent metric, though the retailer has since fallen out of that list.

The purchase of J.C. Penney would also give the landlords more control over the shopping center's space. If another firm takes over Penney, that firm would also get control of certain property rights at the mall. That could make it difficult for landlords to do things like changing the parking structures or exits.

The closing of a J.C. Penney or any other anchor department store is a major risk for a landlord, given the difficulty of finding a replacement tenant in the current economic environment. Gyms, entertainment operators and co-working companies that have taken up spaces in malls are now struggling to stay afloat, let alone expand.

For malls that have already lost an anchor tenant, losing another one could trigger cotenancy clauses. These clauses allow smaller tenants in the mall to pay a reduced rent if, for example, two anchor tenants close their stores. If these spaces aren't occupied within a set period, say 18 months, other tenants may also be allowed to terminate their lease without penalty.

"They need J.C. Penney to be there, to keep the lights on," said Soozan Baxter, a retail and hospitality consultant.

Write to Esther Fung at esther.fung@wsj.com