J.C. Penney reached an agreement to sell its retail business to the mall operators Simon Property Group and Brookfield Property Partners on Wednesday, averting a total liquidation that would have had significant ripple effects through the industry and cost tens of thousands of jobs.

Simon and Brookfield will pay about $300 million in cash and assume $500 million in debt to buy J.C. Penney, lawyers for the retailer said at a Bankruptcy Court hearing. The deal will split J.C. Penney into separate companies, with Simon and Brookfield running the retail business and its creditors owning a portion of its real estate. In all, the deal values J.C. Penney at $1.75 billion, including the funds committed to support its business after it emerges from bankruptcy.

“We are in a position to do exactly what we set out to do at the very beginning of these cases, and that is to preserve 70,000 jobs, a tenant for landlords, a vendor partner and a company that has been around for more than a century,” Joshua Sussberg, a lawyer at Kirkland & Ellis, which has been representing J.C. Penney, said at the hearing.

It was not immediately clear how many stores the mall operators will keep open, or exactly how many jobs they would preserve. The future of the department store chain, which is based in Plano, Texas, and filed for Chapter 11 bankruptcy protection in May, had been unsettled. Liquidation was floated as a possibility as deal talks stalled this month.

That would have been a major collapse. J.C. Penney, which started as a dry goods store in Wyoming in 1902, was one of the first national retailers to file for bankruptcy during the coronavirus pandemic, and while other familiar names like Brooks Brothers and Lord & Taylor have followed, it remains the biggest to fall. It entered bankruptcy with $10.7 billion in annual sales, about 85,000 employees and nearly 850 locations, many of them anchor stores at malls around the country.

The company’s potential buyers also included Hudson’s Bay, the owner of Saks Fifth Avenue, and the private-equity firm Sycamore Partners, according to two people familiar with negotiations, who spoke on the condition of anonymity because of confidentiality agreements. Simon and Brookfield, which have been involved in several deals to buy bankrupt tenants in the past year, were thought to be the most likely buyers, because the loss of J.C. Penney stores would hit their shopping centers hard.

J.C. Penney’s creditors had clashed with Simon and Brookfield over the value of the retail business and the rights to redevelop mall space, the people said. If the creditors lost redevelopment rights, any real estate business that was carved out would be less valuable. The company had until Thursday to strike a deal with creditors, find a buyer or opt to liquidate.

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Credit…Chang W. Lee/The New York Times

The pandemic has upended the retail industry, especially apparel and department stores, and accelerated the fall of chains that were already struggling or overloaded with debt. Temporary store closures dealt a major blow to many mall retailers, which have struggled to regain shoppers who have adjusted to homebound lifestyles and remain concerned about the virus.

J.C. Penney’s bankruptcy already had serious implications for American malls and workers, as the company prepared to close as many as 250 locations and started liquidations at more than 100 stores this summer. Smaller mall retailers often have so-called co-tenancy clauses in their leases, which allow them to pay reduced rent or even break their leases if two or more anchor stores — like Sears, Macy’s and J.C. Penney — leave a location.

Many malls have already lost one or two department stores in recent years and are likely to struggle to find potential replacements as the pandemic persists. At the same time, chains like Victoria’s Secret and Gap are looking for ways to cut back on the number of their stores.

J.C. Penney, which in its heyday operated more than 1,500 stores, was long viewed as a budget-friendly destination for Americans seeking reliable home furnishings and apparel. But the retailer has been on a downward slope for years. It faced growing competition from rivals like Kohl’s and Macy’s, e-commerce took off, and it struggled to attract younger consumers to its midtier mall locations.

Its decline was greatly accelerated in the past decade by the involvement of William A. Ackman, a hedge fund manager, and Ron Johnson, a former retail chief at Apple, whose turnaround attempt became one of the most disastrous retail makeovers in recent history. Mr. Ackman, who bought a major stake in J.C. Penney in 2010 and later joined its board, recruited Mr. Johnson, who sought to transform the stores into collections of boutiques, team up with high-end designers and banish coupons and promotions in favor of everyday low prices.

Mr. Johnson’s efforts ultimately alienated J.C. Penney’s core customers and led to sales and traffic declines — the retailer erased roughly $4.3 billion in sales, or 25 percent of its revenue, in a single year. Mr. Johnson was ousted after 17 months in April 2013, but J.C. Penney has continued to struggle and cycled through executives.

The company traces its roots to Kemmerer, Wyo., where James Cash Penney Jr. invested in a dry-goods store called the Golden Rule, which was later renamed J.C. Penney. Mr. Penney, who died in 1971, remained devoted to the notion of the Golden Rule in how the company treated its workers, sharing its profits with staff from its early days.