Leaseholder, Mendenhall Center search for anchor tenant

Posted: Tuesday, December 18, 2001

If you're paying several hundred thousand dollars a year in rent - and not occupying the space - you want to get out of the deal ASAP.

J.C. Penney is paying rent on 36,433 square feet in the Mendenhall Center in order to satisfy its lease contract with the landlord, Mall PSA LLC. The nationwide retailer is searching for a tenant to take over the space.

Penney left the space - almost an acre - three years ago, closing its stores in Anchorage and Fairbanks simultaneously. However, its Juneau lease contract is binding until 2007, said commercial real estate agent John Williams of JRE Real Estate, "and can go an additional 20 years beyond that." He said he was not at liberty to reveal the exact amount of the rent.

The lengthy lease was signed because the owner of Mendenhall Center, Mall PSA, whose proprietors are Cheryl and Reinhard Fluck of Juneau, built the space to Penney's specifications. To accommodate Penney's needs, Mall PSA made substantial investments. It moved the Mendenhall branch library to another location in the building and added on to the end of the mall structure. The space is functional, built to the state-of-the art in 1992 with its own heating and ventilation system as well as an energy management system.

Reinhold Fluck said he might have a national client interested in renting the former Penney space, but did not want to comment further at this time.

J.C. Penney was what is termed an "anchor tenant" - the largest business in the 200,000-square foot mall. The loss of such a tenant is a headache to the landlord, which is the reason landlords commonly require 20-year leases to protect themselves from unforeseen departures, Williams said.

In mid-November, Penney contracted with Williams through a national agency to find someone to lease the space. He is working with Dennis Watson, a Century 21 Totem Properties realtor and manager for the Penney store from its opening in March 1992 to his retirement in 1996. The store, which closed in August 1998, specialized in apparel, while a Penney's catalog outlet down the hall sold electronic equipment and furniture. The catalog outlet is now at 2490 Industrial Boulevard.

"It was a corporate decision (to close all the Alaska stores)," Watson said. "All the stores were profitable as far as I know. The corporation underwent some changes in direction in 1997 and closed a lot of stores nationwide regardless of how new or old they were."

The Juneau store was attracting clients from across the region, including Whitehorse, especially during the back-to-school season, Watson said. The closure came as a surprise because it followed hard on the heels of visits from corporate executives and discussions about expansion.

Watson, who knows the space from working in it, says it is efficiently laid out for retail.

"It has plenty of parking," he said. "It's easy to get into. It has equipment like a cardboard bailer and a compactor for wet refuse, plus a freight elevator. The primary advantage to this space is that the bulk of it is on the sales floor. You can't manage a store from the stockroom."

To market the space, Williams and Watson will make several tactical moves, including:

Making local businesses aware that a large space is available for a tenant such as a bowling alley, a teen center or a pool hall.

Sending letters to national retailers that have a presence on the West Coast and might want to expand their chains into Alaska. The mailing list will be compiled from the trade magazine Shopping Center Guide. The letter will include a packet of demographics about Juneau and its attractions for businesses. For example, the packet notes the daily traffic count around the mall: 15,100 on Egan Drive; 12,207 on Riverside Drive; 12,476 on Mendenhall Mall Road; and 22,857 on Mendenhall Loop Road.

Contacting retail real estate brokers who deal in commercial real estate in the Pacific Northwest.

Williams suggested retail outlets such as Old Navy, Talbot's, Jo-Ann Fabrics & Crafts and Michael's Arts & Crafts might be interested.

"If a chain comes to Juneau, it makes sense for them also to expand to Anchorage and Fairbanks," Williams said. "So we would talk to our counterparts in these cities about their populations as part of the marketing audience."

Watson is optimistic Juneau can attract a suitable lessor.

"It's a strong retail opportunity for people who offer a breadth of merchandise like Gottschalks," he said. "The capital's being here gives us people coming and going. The space is in the Mendenhall Valley, and the largest percentage of the population lives in the Valley and consumers like convenience. Juneau is really a shopping hub for Southeast."

Ann Chandonnet can be reached at

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