homeWelcome, sign in or click here to subscribe.login
     


 

 

Real Estate


print  email to a friend  reprints add to mydjc  

Marc Stiles
Real Estate Editor

November 3, 2011

Real Estate Buzz: Has Penney bagged downtown Seattle store?

By MARC STILES
Real Estate Editor

A source says J.C. Penney has pulled the plug on plans for a store in downtown Seattle.

Earlier this year, the retailer leased nearly 48,000 square feet in the Kress Building at Third and Pike. Neither J.C. Penney nor the new owner of the Kress would comment on whether the deal is off.

A spokeswoman for Penney said she would get back to us. A day later, she emailed that the company had no comment. Stuart Tanz, CEO of the company that bought the building this fall, also declined to comment on Tuesday, and did not return a call yesterday.

Last summer, Callison Architecture applied to the city for a permit to build out space in the Kress Building for J.C. Penney. Ten days ago, the city sent a “correction letter” to the applicant, which a spokesman for the Department of Planning & Development said is fairly common for larger remodels. He said DPD plans to continue processing the application once the corrections are returned.

A Callison spokesperson wouldn't say if and when the corrections would be submitted.

An about-face by J.C. Penney would be a big blow for downtown just as things are looking up. The Downtown Seattle Association said last year more than 60 retailers either opened stores or announced plans for stores downtown. The biggest is Target's 90,000-square-foot store at Second and Pike, where work is under way for a 2012 opening.

News of Penney's plans fueled the optimism. There was a sense that the gnarly stretch between Pike Place Market and the retail core would finally be fixed.

If J.C. Penney has decided to walk away from Third and Pike, it could because of the new CEO. On June 14, a memorandum about Penney's long-term lease was filed with King County. The same day the chain announced it had recruited Ron Johnson, the man behind Apple's successful retail operation, to be the next CEO.

The news caused investors to bid up Penney's shares more than 17 percent, adding more than $1.2 billion to the retailer's market value.

Dick Outcalt of Seattle-based Outcalt & Johnson: Retail Strategists said hiring Johnson from Apple was the smartest thing the board of J.C. Penney did. Walking away from the Third and Pike location “may be the second smartest thing that the board of Penney's has done,” he said.

He was surprised when news broke in the DJC about Penney's lease at Third and Pike, because it struck him as “outrageous” given the scruffy character of the corner.

Third and Pike is within a six-block area that, according to an analysis by The Seattle Times, had nearly 1,000 crime incidents over the last year. They included 98 reports of shoplifting, 86 narcotics violations, 83 assaults and 49 robberies. Not exactly roll-out-the-welcome-mat numbers for retailers and their customers.

Outcalt thinks that an ideal place for Ron Johnson's vision of J.C. Penney is on top of the tony retail podium in Rainier Square, the full-block complex between Fourth and Fifth avenues and Union and University streets.

“There are other perfect spots they could be in Seattle, yes, but not at Third Avenue and Pike Street,” Outcalt said.

A few months after J.C. Penney signed the Third and Pike lease, Tanz's company, Retail Opportunity Investments Corp., paid nearly $28.8 million for the Kress Building. That was almost $25.9 million more than what the sellers had paid for it 17 years before.

ROIC's track record shows it's most likely savvy enough not to have paid that kind of money without knowing J.C. Penney couldn't get out of the lease.

Penney's 2010 revenues were $17.8 billion. Rent for the Kress Building “is peanuts to them,” Outcalt said.

That kind of financial strength would allow Penney to create what Outcalt calls a “flagship location” in Seattle. For Ron Johnson “price is irrelevant but location is critical,” Outcalt said.

That kind of thinking allowed Johnson to build Apple into the retail powerhouse it is and could make J.C. Penney shine again.

FAA still hunting for new home here

It's been a year since we've heard anything about the Federal Aviation Administration's hunt for a new home in South King County, but a government official says the project is still alive.

In early 2010, the agency announced it was looking to lease nearly 519,000 square feet of office and related space for 20 years. The FAA said its 400,000-square-foot lease for the Northwest Mountain Regional Office in Renton was expiring. The agency needed more space here to consolidate operations from California and Alaska.

The assignment drew interest from work-hungry developers across the country. Locally, cities were teaming up with developers and contractors in hopes of landing the facility.

“Everybody and their uncle is interested in this,” said Alex Pietsch, Renton's economic development administrator.

The fever subsided when the FAA subsequently said it had significantly reduced the size of the new facility, and would delay action on the project for some time.

The inability of Congress to resolve the 2012 budget further slowed things down.

Expect interest to grow again soon. A spokeswoman for the U.S. General Services Administration, which handles facility issues for federal agencies, said an announcement could come in the first quarter of 2012.

Got a Buzz tip? Send it to marc@djc.com or call (206) 219-6517.


Got a tip? Contact DJC real estate editor Brian Miller at brian.miller@djc.com or call him at (206) 219-6517.


Previous columns:



Email or user name:
Password:
 
Forgot password? Click here.