Challenge

In November 2006, the CBRE Industrial Tenant Advisory Services team was contacted by JCPenney to discuss finding a 400,000- to 500,000-sq.-ft. import distribution center for the company, as well as 15 to 20 acres of trailer storage. The new facility had to be fully operational by August 15, 2007, in time for the “back to school” season. The fallback plan was to identify a greenfield site for a build-to-suit facility with occupancy in August 2008. However, since JCPenney had plans to open 50 new retail stores in 2007, finding an existing facility was the top priority.

Solution

JCPenney targeted Northern California due to its proximity to the Port of Oakland. After a thorough survey of potential sites, the team of Dave Haggerty, Ryan McShane and Tyson Vallenari identified the former 440,000-sq.-ft. Long’s Drugs Distribution Center in Lathrop, CA, as the existing facility most similar to JCPenney’s requirements.

Although the Long’s Drugs facility lacked 25 dock positions and did not meet the significant trailer parking requirement, the CBRE team was confident they could implement an integrated strategy to ensure delivery by August. After extensive negotiations with JCPenney, a letter of intent was signed in mid-January, leaving only seven months to design, permit and construct the improvements.

The team handled the transaction management and quickly engaged several key third-party services to assist with this project, including project management, architects and engineers, a general contractor and a material handling consultant. The team also identified and negotiated acceptable terms with a third-party owner for an additional nine-acre trailer drop lot.

Benefit

JCPenney ultimately signed a 15-year lease with First Industrial Realty Trust for the former Long’s Drugs facility (25 additional docks were added) plus the adjacent 8.5-acre land for trailer parking. Construction for the improvements commenced in late March, and JCPenney’s target occupancy date of August 15, 2007, is currently ahead of pace. The CBRE team can confidently benchmark $7 million in occupancy cost savings, not to mention the avoided cost implications of delaying the opening of this critical asset to JCPenney’s supply chain.