Back in 1992, the department-store chain was among the first of big corporations to move its headquarters to a pastoral campus in the suburbs from the office canyons of a major city.
Today, the retailer is again helping set a trend, with the sale of its headquarters and much of the land in Plano, Texas.
This time, the trend is the redevelopment of suburban campuses to denser, more urban settings, where businesses can give employees the option of living, working and playing with minimum time spent in automobiles.
Just before the new year, J.C. Penney closed on a deal to sell and lease back its Plano headquarters. That, along with its sale three years ago of a 240-acre section of its corporate campus, is helping Plano morph into the hybrid of urban and suburban living becoming popular with big corporations.
The old campus already has lured Toyota Motor Corp.’s North American headquarters from California as well as major operations of J.P. Morgan Chase & Co., FedEx Corp. and Liberty Mutual Insurance Co. That section will have a mix of apartments, stores and restaurants called Legacy West.
“Legacy West is urbanizing the suburbs,” said Karen Whiteknact, a senior vice president with Boston-based Liberty Mutual. “We’re right there in the middle of the action.”
The evolution of the J.C. Penney property stands as an example of one way to revive suburban corporate campuses now falling into disfavor in the U.S.
As a younger workforce gravitates to more downtown settings, companies are feeling isolated in glass and steel headquarters tucked into acres of parkland and forests.
“The smart money is buying these campuses cheap, opening them up and tying them into communities,” said Joseph Brancato, a principal of Gensler, an architecture firm working on transforming four different corporate campuses.
J.C. Penney’s sale and lease-back of its real estate shows how the nation’s retailers are cashing in on their property to deal with the upheaval in store retailing caused by competition from online shopping and other pressures. The proceeds are helping J.C. Penney reduce the big debt load it took on after an ill-fated effort to reinvent itself about five years ago.
The sale and lease-back deal “represents a significant financial milestone,” said J.C. Penney Chief Executive Marvin Ellison.
Sam Ware, the Texas developer who led the investment group that bought the headquarters, called it ironic that the transformation of Plano has roots in J.C. Penney’s financial difficulties. “The worst thing that happened to J.C. Penney was the best thing that happened to the city of Plano,” he said.
About 20 miles north of downtown Dallas, Plano was a bedroom community until the 1980s, when H. Ross Perot developed a corporate campus for his Electronic Data Systems Corp. on 2,000 acres of prairie west of the city. EDS, which was eventually acquired by Hewlett-Packard Co., was joined soon by other big companies in the area, like Frito-Lay Inc. and J.C. Penney.
Most of these companies opted for bucolic corporate-campus settings. J.C. Penney built its gleaming, 1.8 million-square-foot headquarters with a rotunda and a statue of founder James Cash Penney. Closed to the public, the complex was a self-contained world including a day-care center, drugstore, cafeteria and private dining rooms.
The first major effort to give the area a more urban feel started about 17 years ago, when EDS cut a deal with developer Fehmi Karahan to develop Legacy Town Center on 155 acres in the area, with shops, residences and offices adjoining a park and man-made lake.
The urbanization effort accelerated when J.C. Penney started selling its prime real estate. Three years ago, it sold 240 acres to a partnership it created with Mr. Karahan, who proposed a master plan of office, retail and residential.
Big name tenants quickly signed on.
“I remember when they said this was going to be a five- to eight-year project,” said Plano Mayor Harry LaRosiliere. “Here we are, three years in, and there are only a few dozen acres left.”
More development is expected. As part of the transaction, the retailer will be leasing back 1.2 million square feet, leaving Mr. Ware’s group 600,000 square feet to lease to other tenants.
The deal also came with 45 acres. The new owners are planning a mix of retail, residential and other uses.
“We are benefiting from the success of everything around us,” Mr. Ware said.
BY: Peter Grant
This article originally appeared in The Wall Street Journal
Read the original article here.