J.C. Penney’s plan to develop land around its Plano headquarters could generate $200 million, according to an analysis of property records and a project estimate.
The retailer said last week that it has hired three firms to develop 240 acres near its headquarters, where it moved in 1987 from New York. The land has been appraised at $90 million, according to public records, and its value could at least double once the property has been developed for commercial use, said Fehmi Karahan, chief executive officer of Karahan Cos., one of the firms.
While completing the project will take several years, Penney could begin sharing in the proceeds with developers in as little as three months, Karahan said. The ultimate value of the land will depend on market conditions, he said.
Penney CEO Mike Ullman is developing the land at a time when real estate values in Plano are increasing as businesses move from the costlier Dallas.
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The project was sidelined in 2011 when Ullman was replaced by Ron Johnson, whose plan to transform the department store chain into a more upscale retailer failed. Ullman, who returned as CEO in April, has raised cash after sales tumbled, losses mounted and cash dwindled under Johnson.
“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,” Katheryn Burchett, senior vice president of real estate and property development at J.C. Penney, said in a statement Feb. 6.
FedEx Office, a unit of FedEx Corp., is in talks to build in the Penney development and move the division’s headquarters there from near the Galleria development in Dallas, according to Heather Alexander, a FedEx spokeswoman.
The new development, to be called Legacy West, will be built at the southwest corner of the Dallas North Tollway and Texas 121. The project will also be managed by Columbus Realty and KDC.
Legacy West is an extension of the Legacy business park created by Ross Perot, the computer services entrepreneur who ran unsuccessfully for president. The development, at more than 2,600 acres, is filled with office buildings, shopping centers and housing. The Dallas Business Journal first reported the FedEx talks.
Joey Thomas, a spokesman for Penney, declined to comment on the timing, interested buyers or potential proceeds.
“We’ve chosen to invest the land with a partnership, as there’s a favorable financial upside to realizing the full value of the land over time,” Thomas said in an email.
Possible buyers, including an unnamed hotel chain, are in talks to buy parcels that should start generating cash in three to six months, Karahan said. He declined to provide details on the partnership’s finances and future gains.
While the chain considered selling the raw land to earn a quicker return, the company instead chose to boost its value by having developers add infrastructure such as roads and get zoning rights before selling it to companies for construction of offices, retail centers and housing, Karahan said.