J.C. Penney is considering selling its Plano, TX, campus headquarters, saying Friday that leasing back some of the 1.8 million-square-foot, 64-acre property would net it considerable savings. The move follows remarks last year from CEO Marvin Ellison that the company would be looking at ways to trim costs.
The move would save on maintenance, property taxes, and interest payments because proceeds would enable it to pay down debt it accrued during the turnaround led by CEO Ron Johnson, the company said.
J.C. Penney has occupied the three-story office building that it built as its global headquarters since 1992, when it moved there from New York. Any new owner would also be privy to some 650,000 square feet of space in another nearby business campus still under construction.
With a robust real estate market in several areas of the U.S., many retailers are increasingly under pressure—either from their own books or from their shareholders—to extract value from their property portfolios.
"Even as we continue to deliver positive financial results across all aspects of our business, including delivering year over year gross margin increase in the fourth quarter, this presents an ideal opportunity to reduce outstanding debt and create long-term savings for the Company," Ellison said in a statement.
A sale of its headquarters is one of the more straightforward ways to accomplish that. Both Sears and Hudson’s Bay Co., among others, have spun off real estate holdings into real estate investment trusts. In the process, Sears landed a $2.6 billion windfall from shareholders, and Hudson's Bay Co. said it's looking to ultimately create real estate investment trusts (REITS) that could be traded on the stock market and acquire other desirable properties. In fact, governor-executive chairman Richard Baker last year said the company is on the hunt for more real estate as part of its growth strategy.
And even Macy’s, which long resisted calls to leverage its real estate, has capitulated to pressure from activist inventors and is exploring the sale of several of its holdings.
A campus like Penney’s in Plano, designed to be a business headquarters, is also a less fraught move than the idea of say, Macy’s selling or spinning off its flagship Herald Square building in New York, an iconic building that has shaped the retailer’s history and played a significant part in American pop culture. (Even gung-ho Hudson's Bay said its REIT plans wouldn’t include Saks’ flagship store in Manhattan, the Lord & Taylor store on Fifth Avenue, or even the Saks Off Fifth outlet chain.)
Still, as long as the real estate market remains healthy, and as retailers sharpen their brick-and-mortar strategies in an omnichannel world, look for more to unload property in some ways and accrue the benefits.