Feb. 6 (Bloomberg) -- J.C. Penney Co. reached an agreement with three companies to develop 240 acres (97 hectares) surrounding its headquarters in Plano, Texas, as real estate demand climbs in the area.
The development, to be called Legacy West, will be built at the southwest corner of the Dallas North Tollway and State Highway 121, J.C. Penney said in a statement today. The project will be managed by Karahan Cos., Columbus Realty and KDC, said the retailer, which has raised more than $3 billion in the past year through borrowings and stock offerings to avoid a cash shortfall.
“That submarket has done really well and that’s right where that J.C. Penney land is,” Greg Biggs, a Dallas-based managing director at commercial real estate brokerage Jones Lang LaSalle Inc., said in a telephone interview. “It’s right in the heart of it.”
J.C. Penney this week reported its first same-store sales gain since 2011 after Chief Executive Officer Mike Ullman revived popular private-label brands and brought back sales events that former CEO Ron Johnson had done away with. The company last month said it planned to close 33 stores and eliminate about 2,000 jobs to help save $65 million a year.
J.C. Penney rose 8.4 percent to $5.66 at the close in New York trading for the largest gain since Nov. 1. The shares have declined 71 percent in the past year.
The Legacy area, where J.C. Penney has its headquarters, was created by Ross Perot, the former presidential candidate and founder of Electronic Data Systems Corp., according to the city of Plano’s economic-development website. About 60,000 people live and work in Legacy, a master-planned area in northwest Plano, according to the website.
“The partners that they have chosen were significantly involved in the success of Legacy Town Center and Legacy itself,” Biggs said. “They’ve done it before, and I believe they’ll be able to duplicate it and do it again.”
Joey Thomas, a spokesman for J.C. Penney, declined to comment on the financial terms of the deal.
The vacancy rate for office space in the far north area of Dallas was 8.7 percent in the fourth quarter, according to data from Jones Lang. That compares with total office vacancies of 19.6 percent in the Dallas area, according to Jones Lang. Asking rents in the far north market averaged $28.16 a square foot for top-tier space, a high for the area.
“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 the statement.
About 1.4 million square feet (130,000 square meters) of speculative office development is under way within four miles (6.4 kilometers) of J.C. Penney’s headquarters, Biggs said.
“You’re looking at quite a bit of space, but the market seems confident that it will all be leased,” Biggs said.
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