A Dallas commercial real estate investment firm may acquire J.C. Penney Inc.’s three-story, 1.8 million-square-foot campus in West Plano, TX, the Dallas Business Journal reports.
Sam Ware, CEO of Dallas-based Dreien Opportunity Partners LLC, is bidding for the campus and has agreed to lease back some 1.2 million square feet to J.C. Penney—a 15-year deal, sources told the Business Journal.
J.C. Penney CEO Marvin Ellison said in February that a sale-and-lease-back deal on the property would save the retailer considerable cash.
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.
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. Hudson's Bay Co. in particular said it's looking to ultimately create such REITs, which can be traded on the stock market: In fact, Hudson Bay governor/executive chairman Richard Baker last year said the company is on the hunt for more real estate as part of its growth strategy.
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. Last week, the department store retailer said it would close 100 stores in locations where the value of the real estate exceeds their value as retail destinations.
A campus like Penney’s in the Dallas suburb Plano, designed to be a business headquarters, is a move less fraught with meaning than, say, Macy’s selling or spinning off its flagship Herald Square building in New York, an iconic structure that has shaped the retailer’s history and played a significant part in American pop culture. Even real estate-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 the Saks Off Fifth outlet chain.
J.C. Penney last week posted a mixed second quarter earnings report, with an adjusted loss of 5 cents per share on revenue of $2.92 billion, up from its loss of 41 cents per share on $2.88 billion in revenue in the second quarter last year. Analysts had anticipated a loss of 15 cents per share on $2.93 billion in revenue, according to Thomson Reuters.
Same-store sales were also a miss in Q2, rising 2.2%, shy of the 2.8% increase from Retail Metrics and the 2.4% increase expected by Thomson Reuters. Sephora cosmetics, home goods, and footwear and handbags were the quarter’s top-performing sales categories.