Posted on: Friday, May 28, 2004
Nordstrom's Ala Moana plan could hinge on Macy's
By Andrew Gomes
Advertiser Staff Writer
When Nordstrom and the owner of Ala Moana Center announced plans this week for the retailer to build a department store at the mall, neither side said there could be a hitch.
Since Monday's announcement, representatives of Nordstrom, mall owner General Growth Properties and existing mall anchor Macy's haven't clearly explained, despite requests, whether Macy's could legally block expansion of the mall.
Macy's inherited a lease that prohibits adding new buildings to the mall between the store fronts and the streets surrounding the mall.
Macy's predecessor, former kama'aina department store chain Liberty House, sued General Growth over the issue four years ago, effectively killing a plan dating to 1996 to add a Nordstrom store on the mall's mauka parking lot.
This time, Nordstrom is to be located outside the mall's property line between Kona Street and Kapi'olani Boulevard. But General Growth wants to add retail shops connecting the new department store with the center's core.
That could give Macy's some standing to object to the mall's expansion, at least the part within the mall's existing boundary.
"That could get to be a pretty entangled legal issue, depending on how the parties wanted to look at it," said one store manager at Ala Moana who did not want to be identified to protect the retailer's relationship with the mall.
Some retail analysts believe Macy's shouldn't have a problem welcoming Nordstrom to Ala Moana, and said Nordstrom is more of a direct competitor with Neiman Marcus, which was supportive of the Nordstrom addition proposed in 1996.
"I think that (Nordstrom and Macy's) have coexisted for a long time," said Bob Toomey, an analyst at securities firm RBC Dain Rauscher in Seattle. "I think that they're not an exact overlap, if you will — though clearly they compete."
But Kurt Barnard, president of New Jersey-based consulting firm Retail Forecasting LLC, said it is in Macy's self-interest to keep Nordstrom out of Ala Moana if it can.
"Most general merchandise retailers are fierce competitors," Barnard said.
He also noted, however, that landlords and tenants often strike deals to allow competitors into a mall.
Toomey said he can't imagine Nordstrom would sign another letter of intent announcing plans to open a store if it had not received assurances that other mall anchors could not block its plan.
Nordstrom spokeswoman Brooke White said the company does not expect anything to hold up its project, and believes Macy's lease provision is no longer an issue.
Jean Coggan, a spokeswoman for Macy's parent, Federated Department Stores, said that "as a matter of policy, Federated is not able to comment on real estate negotiations."
When Federated bought Liberty House in 2001, Macy's West Chairman Jeremiah Sullivan said in an interview that the issue over allowing a Nordstrom store at Ala Moana was settled by Liberty House and not open to negotiation.
David Keating, General Growth's manager for media relations, was unable to say whether connecting the mall to the planned Nordstrom store requires approval from anchors including Macy's.
Ala Moana general manager Dwight Yoshimura and John Behling, a General Growth official involved in negotiations with Liberty House over the initial Nordstrom plan, did not respond to requests seeking comment on the issue.
In 1996, General Growth, which managed the center for then-owner Daiei Inc., did not publicly disclose that anchor tenant approvals for the earlier Nordstrom store plan were needed.
However, over the next five years, Liberty House repeatedly refused privately to consent to the plan for a full-line Nordstrom, and its objections became public in May 2000 when it sued General Growth over the issue. Three months later, Nordstrom canceled its plan and the lawsuit was dismissed.
Some retail industry observers suggest that part of Liberty House's opposition could have had to do with its precarious financial condition that led to its bankruptcy in 1998 and sale to Federated in 2001.
By comparison, Macy's is more capable of successfully coexisting with Nordstrom. The two department stores co-anchor at least five malls owned by General Growth. And on Monday, General Growth announced plans to add Nordstrom to a Boston-area mall where Macy's is an anchor.
Industry analysts say Nordstrom is among the most coveted mall anchor retailers, while General Growth has been perceived as an aggressive pursuer of the department store chain in Hawai'i.
Some observers speculated that the mall owner in late 2000 submitted a plan to buy Liberty House out of bankruptcy to do away with the legal attack on Nordstrom's entry at Ala Moana. The purchase was unsuccessful.
There was more speculation that General Growth's surprise purchase of Victoria Ward Centers in 2002 had to do in part with preventing Nordstrom from completing a plan to open a department store at the nearby competing retail complex.
After the acquisition, General Growth did cancel that Nordstrom plan, and resumed discussions to locate Nordstrom at Ala Moana.
The retailer anticipates construction could begin as early as fall 2005, with a store opening in fall 2007 or spring 2008.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
• • •
