They talked with Saks Fifth Avenue, Jacobson's and Neiman Marcus. They did not get to first base. Then, six months ago, Bay Plaza Cos. officials thought they had an anchor tenant for their $200-million shopping district in downtown St. Petersburg.
Burdines was receptive to talk of moving its big store in St. Petersburg's Tyrone area to a smaller space in Bay Plaza. To sweeten the deal, Bay Plaza would remodel the aging downtown Maas Brothers/Jordan Marsh store nearby.
A commitment for a department store at Bay Plaza would have set in motion a series of events that would have fulfilled the city's dream of a six-block retail district downtown.
Four months later, however, the deal went up in smoke. Under pressure from creditors to slash expenses in its ongoing effort to emerge from Chapter 11 bankruptcy, Federated and Allied Stores Corp. _ the parent company of both Burdines and Maas Brothers/Jordan Marsh _ decided to close or sell 24 stores in Florida, including the Burdines at Tyrone.
In Florida, the new Federated/Allied strategy was clear: The retailer was abandoning locations where Maas and Burdines compete for the same customers.
It was also counter to everything Bay Plaza had banked on.
The news put Bay Plaza back to square one in its quest for an anchor. But that is just one reason the Kansas City-based developer said last month it is rethinking the project and concentrating now on pursuing the most financially stable department store companies.
Bay Plaza's biggest challenge remains ahead.
A recession makes finding an anchor tenant even more expensive for mall builders everywhere.
And most retailers think that even if the recession ends later this year, there will be no return to the go-go store growth years of the '80s. When it comes to finding retailers willing to be downtown, Bay Plaza's timing could not be worse.
Many of the big retailers that Bay Plaza would welcome as an anchor are suffering a sales growth malaise now well into its fourth year.
The nation's retailers already have twice as much retail space as the population can support.
One highly respected retail think tank predicts that up to half the 1,800 shopping malls in the United States will be unable to make it economically in the next decade.
Shopping center starts in the United States dropped 33 percent in 1990. But some of the most sought-after department stores need cash so badly that they are getting much higher financial concessions from mall developers, who need their presence to get financing. Despite the nation's mall overload, dozens of developers are waving ever more lucrative offers to land department stores.
Lifestyle changes of time-strapped, dual-income families have prodded many retailers to rethink their business in the 1990s. Look around. Not one new department store has opened in Tampa Bay since 1984. But in the same period, Home Depot, Circuit City, Marshall's, Wal-Mart and now Target, a so-called discount chain, have come to the area in a big way, siphoning off business that once went to department stores.
Department stores will not disappear. But there will be fewer of them in the future.
In Tampa Bay, Federated/Allied's troubles and the recession have teamed up to create an unsettled department store market.
At least five financially healthy department store chains are interested in building a bigger presence in Tampa Bay sometime in the 1990s. But they are all jockeying for position, weighing the risks of investing here or somewhere else, this deal against that deal.
Now they have their pick of a number of mall spots where shoppers already travel.
The Burdines stores in Tampa's University Square Mall and Tyrone's Crossroads Shopping Center are on the market. And there are signs that Gayfers is talking with Maison Blanche about buying some or all of its stores on Florida's West Coast. Meanwhile, four other suburban mall projects in Hillsborough County are fighting for the same anchor stores.
"A lot of things changed since we first looked at doing this project (Bay Plaza) in 1986," said Lynn McCarthy, chairman of Bay Plaza's developer, J.C. Nichols Co. "The project is on schedule in spite of the economic chaos caused by the recession. But we have to focus now on selling retailers on the market in St. Petersburg. That's where two-thirds of the sales will come from. And that's what the retailers focus on. We have to adapt to the changing realities of the marketplace."
For several years, Nichols' high-profile joint venture partner, Neil Elsey, made a lot of bold pronouncements about the top-of-the-line retailers that Bay Plaza hoped to land. But when Nichols bought out Elsey last month, McCarthy wasn't talking about Gucci or Tiffany's any more.
McCarthy says he has not given up on Saks and has a lot of specialty retailers that are interested in Bay Plaza. He's not going after a discount store. But he's committed to filling Bay Plaza with a broad range of retailers that appeal to pocketbooks of all sizes _ the same formula that paid off for Country Club Plaza, the company's landmark project in Kansas City.
How it's done
Assembling retailers for a regional mall is like playing three-dimensional chess. Plenty of retailers want to be in new malls. But lining them up requires the skills of a United Nations diplomat. Retailers have herd instincts. And none wants to be first to sign a lease.
Regional malls feed off traffic drawn by anchor stores. So department stores get the best deals. Then, specialty retailers are signed up at rents that have been inflated to make up what the developer gave away to get the department stores.
Without anchors, no lender will finance a mall these days. So a lack of signed leases from specialty retailers means little early on, most experts say. It's a process that consumes years, not months. And Bay Plaza has been working hard at finding an anchor for almost two years.
"They're really rookies, babies in this market," said Wayne Litzau, vice president of JMB Development Co., which is building Brandon Town Center for a scheduled opening in 1993. "We've been at it here for seven years. Until last week, I said we had five anchors committed. Now I have to say up to five. Today everybody in retailing is grappling with their strategy."
Sometimes having a good anchor isn't enough. Old Hyde Park Village in Tampa is considered a success today. But Jacobson's was alone there for years. John Stevelberg, formerly the leasing manager for the village, compared the process of wooing retailers there to "chipping away at a block of ice." Sharper Image was still negotiating a lease after it opened its store.
Department stores are not eager to be downtown anywhere. In fact, Maas Brothers in downtown St. Petersburg is one of only two survivors in the downtowns of major Florida cities.
A few downtown malls have worked as redevelopment projects, notably in San Diego and Columbus, Ohio.
"But you need people to attract business," said Stanley Marcus, a retail consultant who shaped Neiman Marcus, the only department store left in downtown Dallas. "The suburbs are where people live. Unless people live there, a mall won't bring them in."
How it's changed
A few years ago, big-name department stores wanted free land, a building and a parking lot before committing to a mall.
Today the price has doubled for the big names. Some get free rent for 20 years plus their first year's inventory to stock the store.
Federated/Allied got $38-million worth of concessions to put a Bloomingdale's in a Minneapolis mall now under construction. Debt-ridden Macy's got a similar offer to open in Miami's Bakery Center, a struggling restaurant and retail complex that opened between pricey Coconut Grove and Dadeland four years ago. A judge in the Federated/Allied bankruptcy case approved the Bloomingdale's deal because the beleaguered retailer had nothing at risk.
Retailers comb maps to pick store sites. Their decisions are guided by years of working the suburbs. They want visibility on major highways and easy access.
For a regional mall, they want 250,000 people living within five miles, up to 350,000 within 10. They want high percentages of respectable household income. Even more crucial now are estimates of disposable income.
In a down economy, Bay Plaza is also working at another disadvantage. Nichols is highly respected among retailers, but the St. Petersburg project would only be Nichols' second mall. So it cannot twist retailers' arms with the same power as the nation's biggest mall builders. Because they build so many malls, giants like Melvin Simon & Associates, JMB and Edward J. DeBartolo Corp. can force department stores to accept spots in more risky sites by packaging them with sure-bet locations.
Even when the economy improves, there will not be a return to the retail building binge of the 1980s. Fundamental changes are at work in what people buy and where.
Management Horizons, the Price Waterhouse retail unit, estimates that constant-dollar retail sales growth in the United States will drop by half to 1.5 percent a year in the 1990s. And more shoppers see a trip to the mall as just another shopping trip.
"The consumer of the 1990s will be older and shops differently," said Dan Sweeney, Management Horizons' chairman. "She makes fewer trips. She visits fewer stores. She places more value on convenience. She is more store and brand loyal. This is not a consumer who is anxiously awaiting a brand new, six-anchor, 1-million-square-foot shopping center."
"We're seeing a permanent change in lifestyles today," said Ken Macke, chairman of Dayton Hudson Corp., a Minneapolis-based chain that owns both department and discount stores, including Target. "Today's shoppers want it fast and friendly. They demand quality, but only at a good price."
"Most department stores offer none of that today," said Marcus.
A confused market in Tampa Bay
Keeping track of department store real estate strategies is a secretive, murky business. In Tampa Bay it has gotten murkier recently, and the unsettled market did Bay Plaza no favors.
The Federated/Allied cutback has opened the market to some new players and provided established locations for potential Bay Plaza tenants looking to arrive, expand or upgrade.
Rumors are everywhere. Executives are unusually tight-lipped. And people in dark suits inexplicably have appeared in the past few weeks on the sales floors of many area department stores to measure things, snap pictures of tears in the carpet and take inventory.
This much is known. Dillard's is eyeing sites. So are Montgomery Ward & Co. and Mervyn's. Bay Plaza gave Parisian Inc. executives a tour of the St. Petersburg project.
Gayfers is reportedly talking about buying some or all of the Maison Blanche stores in West Florida. Officials with both companies will not comment.
"We do not comment on rumors," said Maison Blanche Inc. chairman Hans Sternberg.
What about Saks?
As was true three years ago, Bay Plaza and West Shore Plaza in Tampa are both flirting with Saks as the chain's new owners rewrite a five-year development plan.
Someday, Saks will get to Tampa Bay, company officials say. After all, Tampa Bay and Seattle are the two largest metro areas in the United States without one of their 47 stores. But when, nobody is saying.
For 19 years, the moderately priced apparel chain was content to have one store in the area, at Clearwater Mall. Now it seems serious about expansion, with an eye on some Maison Blanche stores in west-central Florida and a Burdines as well. Credit rating is second only to Wal-Mart among major retailers.
The Nordstrom of the South, this 22-store chain sells moderate to better apparel lines by lavishing customers with service. Family that molded the Birmingham,Ala., chain for 57 years recently got it back from ill-fated Australian mall developer L.J. Hooker, burdened with $200-million in debt. Now building two stores a year, the closest in Sarasota and Pensacola. Others announced for Orlando and Tallahassee.
It sells moderately priced clothing, consumer electronics, appliances and home furnishings. Former owner Mobil Oil Corp. ran it into ground, but Chairman Bernard Brennan led management buyout, then guided Chicago-based chain through turnaround. Company now upgrading its locations, is potential bidder for Burdines stores that are for sale.
Considers itself a mega-sized version of The Gap, the casual clothing chain. Has become hot growth vehicle for Minneapolis-based Dayton Hudson Corp. and now has 227 stores. First hit Florida in Lakeland, then converted five Lord & Taylor's in South Florida. Says it wants to flesh out South Florida market before coming to Tampa Bay in two to five years, but has brokers combing the area now.
Full-line department store has moderate to better offerings and successful track record. Little Rock, Ark.-based chain came here after buying Ivey's. Renowned for negotiating bottom-dollar deals, is expected to bid for best of 20 Maas Brothers/Jordan Marsh stores on market. Usually averse to downtown spots and prefers to dominate markets. Some say it would take five stores to dominate Tampa Bay. Has two now, and two more lined up for malls in Brandon and north Tampa that open in 1993-94.
WHAT: Bay Plaza is a retail and entertainment district in downtown St. Petersburg, to be developed, leased and managed by the Bay Plaza Cos. Originally a joint partnership of the Elcor Cos. of Phoenix and J.C. Nichols of Kansas City, Bay Plaza recently became a Nichols-owned subsidiary.THE COST: If completed, the 10-year project will cost $200-million, with the city paying $40-million and the developer paying $160-million. So far, Bay Plaza says it has spent $24-million. The city has spent $23.7-million.
STATUS: Two years after the work started, the first part of the three-phase project is complete: a six-story, Mediterranean-revival structure with four floors of parking atop two floors of retail space. The building takes up one city block.
TENANTS: No tenants have signed up yet. With the initial phase's retail space empty, Nichols officials say the company will not build anything else in the project until they find retailers and new financing. A Nichols executive last week said the company could pull out of the project if it remains unprofitable after the recession ends.