The Dallas Morning News

J.C. Penney picks developers for its acreage in Plano


By Maria Halkias and Steve Brown, The Dallas Morning News


J.C. Penney has teamed up with three real estate companies to develop the 240 acres around its headquarters in Plano.


Karahan Cos., which developed the mixed-use Legacy Town Center nearby, is leading the development team, which also includes Dallas-based KDC and Columbus Realty.


The deal, which has been rumored for well over a year, will be announced Thursday morning.


The vacant land is one of the largest undeveloped parcels left in West Plano, and the project has the potential to be even larger than Legacy Town Center, which sits on 168 acres.


While the project will generate cash for Penney, the company didn’t say how much money it expects to receive in the deal or how soon. Penney is in the midst of a difficult turnaround after a failed attempt to remake the department store in 2012.


The company also tapped its real estate in 2012 when sales plummeted under former CEO Ron Johnson. Penney sold $526 million worth of noncore real estate assets that year.


Penney’s land is just north of its home office and borders the southwest corner of the Dallas North Tollway and State Highway 121. It’s considered a prime spot and is being called Legacy West. Legacy Town Center is on the east side of the tollway.


The 240 acres aren’t part of the collateral that Penney used in May to secure a $1.75 billion loan put together by Goldman Sachs. But the $4 billion of collateral does include the adjacent 120 acres that Penney’s 2 million-square-foot headquarters sits on and several other buildings.


When Penney got the loan, Cushman and Wakefield valued the headquarters, the acreage and 10 distribution centers at $762 million. Another $3.3 billion in collateral was from 306 Penney stores the company owns and 123 stores with ground leases.


Karahan has been working on a deal for the Penney property for several years. Apartment builder Columbus Realty and developer KDC both have a long track record in the Legacy Town Center area. KDC has built several large office projects near Penney’s headquarters, including the new Encana Oil & Gas tower on the tollway.


Columbus Realty, headed by developer Robert Shaw and co-founded by Roger Staubach, has built hundreds of high-end apartments in Legacy Town Center.


Mixed-use plans


The team plans to put high-rise offices, a hotel, apartments and shops in Legacy West and create a development similar to Legacy Town Center, which is anchored by a Marriott Hotel and includes a large, pedestrian-friendly residential and retail development.


Penney has owned the Plano land since 1987, when it moved here from New York and bought the property for its corporate campus, which was completed in 1992. It was one of the first companies to move to the Legacy corridor, which is now home to other big U.S. companies including Frito-Lay and Dr Pepper.


“We have seen a great deal of business and residential growth around the home office over the last 25 years, and now is the time to capitalize on this attractive asset,” said Katheryn Burchett, Penney’s senior vice president of real estate and property development. “Karahan, Columbus, and KDC are trusted partners with a respected reputation, and we believe they will develop the land adjacent to our home office thoughtfully.”


Legacy West’s project leader, Fehmi Karahan, started developing Legacy Town Center in 1999. It’s considered one of North Texas’ most successful mixed-use developments. “We are all developed except one final tract. The entire 168 acres is gone,” Karahan said.


“All of us are experts in our own field. J.C. Penney felt like we can deliver as developers better than any other team,” he said. “We want to create maximum value for this beautiful piece of property.”


Increase disappoints


On Tuesday, after Penney reported its first same-store sales quarterly increase since 2011, the company was shot down by investors and analysts who believed it should have reported a stronger number than its 2 percent increase.


Penney also said Tuesday that it ended its fiscal year on Feb. 1 with more than $2 billion in cash. Still, some analysts think Penney could wind up short on cash again next fall when inventories crank up for back-to-school and Christmas.


It’s been Penney CEO Myron “Mike” Ullman’s style to have a cash cushion and to stuff it well before it’s needed.


A month after Penney’s board asked Ullman to come back to his old job, Goldman Sachs arranged the badly needed $1.75 billion loan to stabilize the business.


Penney’s stock price has been among the most volatile in the market over the last few years. On Wednesday, its shares gained 14 cents to close at $5.22 a share. The stock has been on a steady decline, trading at levels it hasn’t hit since the early 1980s.