J.C. Penney might sell its company head quarters to pay down its debt.
The apparel retailer that has been working to regain its footing said Friday that it is pursuing the potential sale and partial leaseback of its Plano, Texas home office as part of a continued effort to curb debt and manage expenses.
“With the tremendous growth and development currently taking place within Plano and North Texas, there’s no better time to take advantage of this lucrative market by pursuing a sale of our Home Office real estate,” CEO Marvin R. Ellison said. “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.”
For the third quarter ended Oct. 31, 2015, Penney’s reported a 5 percent increase in net sales to $2.9 billion and an improvement to gross margin by 70 basis points. Earnings before interest, tax, depreciation and amortization (EBITDA) was up $5 million to $107 million in the quarter, but the company’s long-term was $5.15 billion.
Penney’s has been headquartered in the 1.8 million-square-foot Plano space since construction was completed in 1992. The sale-leaseback action follows a decision made in 2014 to contribute a “significant portion” of land around the home office to a joint venture with a team of developers, the company said in a statement.
According to Penney’s, the new owner would be able to market over 650,000 square feet of contiguous space in the Legacy Business Park area, which plays home to several Fortune 500 companies including PepsiCo, Hewlett Packard and FedEx Office & Print Services.
Proceeds from the transaction would go to paying down the debt, and the cost of leasing space within the building would be offset by the reduction in maintenance costs, property taxes and interest expense.