Ala Moana to subdivide J.C. Penney space

By Andrew Gomes and David Butts
Advertiser Staff Writers

The owner of Ala Moana Center said today it will convert the former J.C. Penney store into space for at least 30 smaller stores and restaurants.

General Growth Properties, which owns the Ala Moana Center, plans to turn the space formerly occupied by J.C. Penney into multiple smaller shops. Electronics and home-furnishing stores and restaurants are likely candidates, experts say. Bruce Asato • The Honolulu Advertiser

"Virtually every retailer in the world knows Ala Moana and wants to be here," said Kay Day, regional vice president for leasing at General Growth Properties, owner of the center.

The company began seeking new tenants on Monday and is looking for a mix of national and local retailers and restaurants. Day said one or more big-box retailers will likely be taking spaces that could range from 10,000 to 30,000 square feet. The stores will range from luxury merchandise to what the center's manager calls "value" stores, such as discount chain Wal-Mart.

Redesign of the three-level J.C. Penney space will involve adding sidewalks and possibly interior walkways, Day said. The configuration will not be decided until the tenants have committed, she said.

The decision creates significant opportunity for retailers, some of whom wait years for space to open up at the state's biggest shopping center.

The Penney space is bigger than the mall's newest addition, a 130,000-square-foot third level that added 50 percent more space to the mall in the late-1990s. It also is bigger than the 160,000-square-foot Neiman Marcus store that opened in 1998.

"That's a huge, huge deal — it's two-thirds the size of Royal Hawaiian Shopping Center," said local retail analyst Stephany Sofos about the Penney space at Ala Moana.

The move also ends speculation that General Growth would use the space for a full-line Nordstrom department store, which the company said it was considering. That move, considered likely by some retail analysts, would have fulfilled a more than 10-year effort by the Seattle-based department-store chain to open a full-line store in Hawai'i.

General Growth has been negotiating to bring Nordstrom into the mall after a plan was scuttled by former department store Liberty House, which had a provision in its lease allowing it to prohibit the addition of another department store outside existing mall walls.

That objection was repeated by Macy's when it took over Liberty House's lease last year.

Nordstrom opted to build a full-line department store at Victoria Ward Centers, but canceled its agreement after General Growth bought Victoria Ward in May.

Nordstrom officials could not be reached yesterday to comment on the Ala Moana decision.

Several Hawai'i retail analysts had predicted that General Growth would choose to divide the Penney space to increase net income and diversity of stores, especially because anchor tenants such as Nordstrom generally don't pay much rent compared to many smaller retailers.

"Nordstrom was probably offering a low base rent," said Rodney Pontillo, retail services group managing director for Honolulu real estate firm Grubb & Ellis/CBI Inc. "With 30 stores you would probably get three to four times the rent Nordstrom would pay even with the walkways you have to put in."

Leasing experts said prospective retailers that General Growth may seek could include Pottery Barn, Crate & Barrel, electronics retailer Best Buy and home furnishings by Macy's.

"Our customers' tastes are constantly evolving, and finding space for new and exciting retailers who would like to be in Hawai'i has always been a tremendous challenge," Day said. "This is an exciting opportunity for us to offer (new) retailers a chance to be a part of Ala Moana Center."

Day said General Growth is in discussions with retailers interested in the space, but did not disclose names.

Local retail leasing specialists consider home and electronics retailers underrepresented at Ala Moana. They said the mall could also benefit from adding more restaurants.

General Growth acquired Ala Moana from Daiei Inc. three years ago. The company said the mall on an annual basis attracts more than $1 billion in total sales.