Northgate J.C. Penney to close

Northgate J.C. Penney to close

January 16th, 2014 by Mike Pare in Local Regional News

The J.C. Penney store at Northgate Mall in Hixson will soon close.

Photo by Tim Barber/Times Free Press.

J.C. Penney plans to shut its Northgate Mall department store by the end of June, ending a 42-year presence in the Hixson market and putting up another challenge in the redevelopment of the shopping center.

The Penney store, at 170,000 square feet on two levels, has the second-largest retail footprint at the mall behind Sears and represents about 25 percent of the entire facility, according to shopping center owner CBL & Associates Properties Inc.

Penney's Hamilton Place mall store in Chattanooga is to remain open. It also continues to operate at Bradley Square Mall in Cleveland, Tenn., and Walnut Square Mall in Dalton, Ga.

Penney said Wednesday it will close 33 stores and cut 2,000 jobs as part of its effort to return to profitability. The company operates about 1,100 midmarket department stores in the United States, and is trying to win back shoppers after suffering a 25 percent drop in sales in fiscal 2012 during a failed attempt to go upmarket.

CBL chief Stephen Lebovitz said the company will look to refill the space at the Hixson center and at three other J.C. Penney stores closing in CBL properties.

"While we have been encouraged by J.C. Penney's recent improvements in sales and traffic, we have been anticipating certain store closures to occur," Lebovitz said in a statement. "One of our most attractive investments coming out of the recession has been to improve the performance of our properties through redeveloping underperforming anchor locations."

Katie Reinsmidt, a CBL senior vice president, said the mall owner is looking at a number of potential reuses, including possibly tearing down a portion of the store and creating new restaurants and retail outparcels.

"There's a good spectrum of opportunity there," she said.

CBL has been working to breathe new life into the 42-year-old mall since the company purchased it from General Growth Properties for $11.5 million in cash in 2011 in an online auction.

Off-price retailer Burlington is slated to open a 63,000-square-foot store in October. An Old Navy store will debut this year. In addition, Michael's and Ross Dress for Less opened in a redeveloped associated center next to the mall late last year.

Russ Bigham, a board member for the Hixson Council of the Chattanooga Area Chamber of Commerce, said he imagines the Penney closing will hurt, but said it will free up space for future development.

Bigham, who said he was speaking for himself and not the council, added that the new use may draw more traffic than the existing J.C. Penney.

Another developer has offered plans for a $100 million mixed-use project a couple of miles from the mall on Highway 153, which would heighten retail competition in the Hixson market.

Developer Duane Horton's plans would include about 750,000 square feet of new retail and office space along with 280 apartments. The Chattanooga-Hamilton County Planning Commission approved rezoning a 190-acre tract for the project, called Hillocks Farm, earlier this week, overriding a negative recommendation from planning staff. The City Council is expected to take up the rezoning proposal next month.

Other Penney stores closing in CBL's portfolio are at Hickory Point Mall in Forsyth, Ill.; Janesville Mall in Janesville, Wis.; and Wausau Center in Wausau, Wis.

CBL said that other than locations under redevelopment, it has no vacant anchor locations in its core portfolio.

It said that, based on the company's track record of anchor redevelopment, similar projects have generally required 12 to 24 months to complete and an investment of $5 million to $10 million, generating initial unleveraged returns in the range of 7 percent to 10 percent for CBL.

CBL is one of the largest owners and developers of malls and shopping centers in the United States, owning or managing 150 properties.

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318.