The Cupertino Courier

Vallco gears up for major renovation

Movie theater and Dillard's may be among mall's new offerings

By Pam Marino

The State Attorney General's Office has negotiated an agreement with Federated Department Stores that may clear the way for a massive expansion of Vallco Fashion Park, a deputy attorney general confirmed last week.

Vallco's managers are tight-lipped at this point, but the expansion could include a 2,986-seat theater and another major department store, possibly a Dillard's, in addition to Macy's, Sears, and J.C. Penney.

"If that's the case, it becomes a destination mall, a regional player that could compete with Valley Fair," Deputy Attorney General John Donhoff said in an interview last Wednesday.

Federated, which owns the former Emporium site at Vallco, was investigated for nearly six months by the attorney general's office for possible civil antitrust violations. The investigation began after Cupertino officials complained that Federated was keeping a competing store out of the mall by opening Macy's Clearance Center last July.

In the agreement dated Feb. 9, 1998, Federated does not admit to any wrongdoing, and State Attorney General Dan Lungren agrees to not file an enforcement action against the department store chain. The agreement is good through Dec. 31, 1999.

It states that Federated will not block plans for Vallco's expansion. The company does have the right to question plans, however, if they could reasonably hurt it's business at Macy's.

The scant details about the new theater and department store were revealed in some documents from the attorney general's office and Federated that were released by City Manager Don Brown last week. Brown said the mall's new management, the Jacobs Group, has not shared with city officials its plans for Vallco.

A spokeswoman for Jacobs said the plans still hinge on Federated's actions, and there are no solid details at this time.

"There's nothing concrete to release," Angie Freed said Monday.

A Federated spokesperson was unavailable for comment.

The agreement between Federated and the attorney general's office includes malls in Folsom, Sacramento, San Rafael and San Francisco. It is actually an addendum to a 1996 agreement the two sides reached after Federated purchased the Broadway and Emporium stores in late 1995. Donhoff said that the purchase effectively killed competition in cities across the state where Federated became the owner of multiple department stores in some malls. As a result of the 1996 agreement, Federated sold off some stores to competitors.

Vallco was never included in the agreement, Donhoff said, because Federated officials said in 1996 they were going to sell the old Emporium store back to the mall for use by a competitor.

Instead, Federated shut down the Emporium and kept the site empty for 18 months. Smaller stores moved or were forced out of business by the decline in foot traffic. Brown said the mall's sales tax revenues declined 15 percent during that time. Last fall the mall was estimated to be 30 percent empty; a more recent estimate places the vacancy rate at 40 percent.

Then last summer Dillard's Department Stores, based in Little Rock, Ark., expressed an interest in the vacant store. Dillard's has been trying to make an entrance into the California market for the last two years, according to media reports. It opened a store in Stockton in October and has plans for stores in other Central Valley locations, as well as Southern California. Dillard's officials did not return phone calls.

In what a Federated official called a "coincidence," the empty Emporium store was suddenly filled with merchandise in July to become Macy's Clearance Center. This was despite an easement agreement that only allows a "high-end" department stores in the location.

Cupertino City Manager Don Brown said last October that he believed the move was made on purpose to thwart competition at Vallco. He also believed that the clearance center would add to Vallco's downward slide toward possible future closure.

Federated ignored the city's numerous attempts to talk to the company until the state attorney general's office got involved in October. At that point, Federated officials contacted the city.

About a month later, Federated announced it was going to remodel the clearance center to become a full-fledged Macy's.

Remodeling is expected to be completed during the summer. The store will remain open during construction, Macy's officials said.

In the meantime, a former manager of a mall store said stores continue to close at Vallco due to declining business. He said the entire food court near Sears is set to close soon. A confirmation from mall management was unavailable before press time.

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