Macy's, the only major big-box retailer remaining in downtown St. Paul, may be an endangered species.
Mary Topritzhofer, left, Lee Quinlan, Nancy Maloney and Dorothy Bade waited for their luncheon reservation at the downtown St. Paul Macy’s earlier this month. They come to Macy’s four times a year for lunch at the River Room. “We love the popovers,” Quinlan said.
Concern about the demise of the downtown St. Paul Macy's department store soars whenever the retailer faces a deadline, and a big one looms at the end of this year.
As of Dec. 31, Macy's, the only major retail option in downtown, will be out from under a 10-year obligation to the city and could leave town without penalty.
In 2001, to keep what was then Dayton's, the city gave the retailer a $6.3 million forgivable loan. In exchange, the retailer, which became Marshall Field's and then Macy's, agreed to stay through 2012. Leaving sooner would require the retailer to pay back the loan with interest, a total of $6.9 million.
"I don't know if it's three years or five years, but they'll be out of here," said Love Goel, chairman and CEO of Minnetonka-based GVG Capital Group, a global private equity firm that has worked with retailers from Wal-Mart to Nordstrom and Home Depot.
Macy's, not just the St. Paul location, is "fighting a losing battle that cannot be won. It's the walking dead," Goel said.
Macy's Vice President Jim Sluzewski, however, said it's "business as usual at Macy's in downtown St. Paul. We have no further comments to make. Keep in mind that, as a matter of long-standing policy, we do not disclose or discuss results by an individual store, market or family of business."
St. Paul Mayor Chris Coleman said he believes Macy's will remain downtown. Others at City Hall are similarly optimistic. They insist that the store is making money.
Asked what he sees in that spot on 411 Cedar St. in two years, Coleman said, "Macy's."
Some retail and real estate analysts, however, are more pessimistic than the mayor. They say the signs of trouble at the store are clear to casual shoppers, and they describe a tough future for department stores in general with the rise of specialty stores and low-cost retailers.
"Minneapolis is struggling to keep retailers; St. Paul lost that struggle years ago," said Dick Grones of Cambridge Commercial Realty in Edina who has represented Costco, Sports Authority and Jared Jewelers in his 30 years of retail experience.
"If Macy's were to leave St. Paul, it would be a major, major hole in the retail market," said Mike Sims, principal at the Minnesota office of Mid-America Real Estate Group, which represents retail tenants.
Among the lunch-hour shoppers last week was Mitzi Steenberg of St. Paul Park, who was downtown briefly for work and found a couple of sweaters during an impromptu stop. It was her first trip to the store. "I've got a few minutes, I was just passing through," she said.
Lee Quinlan of Inver Grove Heights and her girlfriends come to Macy's four times a year for lunch at the River Room. "We love the popovers," she said.
Gretchen Harwood of Minneapolis works in Lowertown and visits Macy's occasionally at lunchtime. "It's a ghost town during the day. I can't imagine how dead it is after hours," Harwood said.
She and a group of her girlfriends said they call it the "Macy's Outlet" because of what they consider to be a dearth of quality merchandise and service.
"When you go into a store and shelves are thin, that's a sign to me," said Ned Rukavina, a senior vice president of retail brokerage at NorthMarq, a national provider of commercial real estate mortgage banking services with headquarters in the Twin Cities.
At City Hall, however, Coleman and Council President Kathy Lantry say they are told that Macy's is doing well. Lantry said three Macy's officials attended the recent Red Bull Crashed Ice event and she said she came away with a sense that the store is committed to the city.
Rukavina noted that Bloomingdales' departure as an anchor tenant at the Mall of America is a bad sign. Unlike Macy's in downtown St. Paul, Bloomingdales sat in a sweet spot at a hugely popular mall.
"It was a shock, but an indication of how things are changing," Rukavina said.
On the flip side, some business observers see hope in an uptick in office-space leases in both downtowns. "That bodes well because those are your daytime shoppers," Sims said.
Analysts say St. Paul would likely try to romance Macy's into staying, in part because it would be tough to fill the void in the Macy's-owned building. Sims said the list of possible replacements is "very short" and includes Gordman's, Herberger's, Kohl's or J.C. Penney.
"You'd probably need to look at what MOA's doing with Bloomingdales. You'd need to chop it up," Sims said of the space.
Years ago, when it was known as Dayton's, the company was based in Minneapolis and may have kept the downtown St. Paul store as a goodwill gesture. But Macy's is based in Ohio.
"It's going to be a difficult decision," Grones said. "If it's just dollars and cents, they're gone."
Rochelle Olson • 651-925-5035 Twitter: @rochelleolson