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Matt Townsend
(c) 2014, Bloomberg News
NEW YORK — J.C. Penney Co.'s plan to develop land around its Texas headquarters could generate $200 million, according to an analysis of property records and a project estimate.

The retailer said Feb. 6 that it hired three firms to develop 240 acres (97 hectares) in Plano acquired in 1987 upon moving its headquarters from New York. The land has been appraised at about $90 million, according to public records. The 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 the project will take several years to complete, J.C. 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.

Chief Executive Officer Mike Ullman is developing the land at a time when real estate values in Plano are increasing as businesses move there from more costly Dallas. 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 the statement on Feb. 6.

Joey Thomas, a spokesman for J.C. 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 purchase 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 land as is to earn a quicker return, the company instead chose to boost its value by having developers add such infrastructure as roads and get zoning rights before selling it to companies for construction of offices, retail centers and housing, Karahan said.

After Ullman's return in April, J.C. Penney raised almost $4 billion last year via borrowings and a stock offering. The chain had more than $2 billion in liquidity at the end of January, meeting its forecast.

Ullman has brought back once-jettisoned brands to lure shoppers, helping the retailer last week post its first quarterly same-store sales gain since 2011. Sales at locations open at least a year rose 2 percent in the fiscal fourth quarter, after falling 32 percent a year earlier.

When J.C. Penney moved to Plano it bought land in what was then an underdeveloped area about 20 miles north of downtown Dallas. More than two decades later, Plano's population has surged as companies including Dr. Pepper Snapple Group Inc. relocated there.

FedEx Office, a unit of FedEx Corp., is in talks to build in the J.C. Penney development and move the division's headquarters there from Dallas, according to Heather Alexander, a FedEx spokeswoman.

The value of J.C. Penney's property has been increasing, according to the Central Appraisal District for Collin County, Texas. For example, one 97-acre parcel was appraised at a market value of $34 million, up from $18 million in 2011.

The new development, to be called Legacy West, will be built at the southwest corner of the Dallas North Tollway and State Highway 121. The project will also be managed by Columbus Realty and KDC.

Legacy West is an extension of the current Legacy business park that was created by Ross Perot, the former presidential candidate. The development, which spans more than 2,600 acres, is filled with office buildings, shopping centers and housing.

The Dallas Business Journal reported the FedEx talks earlier.

— With assistance from Brian Louis in Chicago.

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