Macy's can soon leave St. Paul without penalty

The New Year brings with it a big question for downtown St. Paul: What will Macy's do?

Come Tuesday, the last remaining major downtown retailer will have fulfilled its 10-year commitment to stay open through 2012, under the terms of a $6.3 million city loan made in 2001 to then-owner Target Corp. to remodel the store.

The catch was that if the department store closed before 2013, the owner -- first Target, then the May Co. and now Macy's -- would have to pay back the city with interest, about $6.9 million.

But now Macy's can shut the doors without financial penalty, which would leave a gaping hole in the middle of the Wabasha Street retail spine and temper downtown gains in transit and attractions.

There is some precedent for worry. Nearly a year ago, shortly after the holiday season, Macy's announced it was closing five Macy's stores and four Bloomingdale's that didn't meet its "performance requirements," including the Bloomingdale's at the Mall of America.

But if Macy's execs have decided anything about the St. Paul store, they're not talking.

"I understand there's a lot of speculation due to the agreement that Macy's has had with the St. Paul store, but we don't comment on rumors or speculation," said Andrea Schwartz, Chicago-based media relations vice president for Macy's North and Midwest region.

"As of this moment, there's a fully functioning Macy's in downtown St. Paul," said Joe Campbell, spokesman for Mayor Chris Coleman. "It's their business and that's up to them. We view that space as being what it is -- a department store."

Speculation on its future might not be so intense but for the fact that the store, which opened as a Dayton's in 1963, has been traditionally viewed as a lower-rung sales performer.

By the mid-1990s, the store was doing only a third of the business of the downtown Minneapolis Dayton's. Retail space in the store shrunk from five floors to three when the store was remodeled in 2002.

Last spring, in an effort to focus service on downtown workers and residents, Macy's decided to close the store on Sundays and pare back daily hours to 10 a.m. to 6 p.m.

That could be a sign that the company actually remains interested in succeeding at that location, said Ned Rukavina, a retail broker at Cushman & Wakefield/NorthMarq in Bloomington. "Macy's is trying to tweak it, making something happen, trying to make it work," he said.

In 2001, Mayor Norm Coleman reached that agreement with Target to subsidize about a third of its $20.4 million remodeling of the downtown store with proceeds from downtown tax revenues. In addition to the $6.3 million forgivable loan, St. Paul also offered a $1.5 million grant for asbestos removal.

Subsequently, the St. Paul Dayton's downsized its retail space, closed one of its restaurants and discontinued home furnishings. But it also upgraded lighting and displays, freshened up the exterior and agreed to remain open for 10 years under pain of having to pay the city back.

Rukavina said he's heard no back door talk that the St. Paul Macy's will close soon. At the same time, he said, the speculation is understandable.

"Lack of traffic and lack of sales volume is why there's this anxiety about whether they're going to close," he said.