Bankruptcy stalls Sunnyvale mall, shops flee

BY DAVID SPEAKMAN

The long-awaited redevelopment of the Sunnyvale mall has been languishing in limbo for years, its owner recently filed bankruptcy and retailers are fleeing one of Silicon Valley’s whitest elephants.

“It’s not a normal year,” says Connie Verseles, manager of retail and hospitality at Sunnyvale’s Department of Community Development. “The mall’s vacancy rate is between 60 and 70 percent.”

In 1999, Sherman Oaks-based American Mall Properties LLC bought the aging Sunnyvale Town Center Mall and renamed it Silicon Valley WAVE (Walk and Village Entertainment). AMP worked with the city on a plan for a $100 million makeover to convert the indoor eyesore into an open-air center tied into the city’s popular Murphy Street historic district.

But the dot-com bust and tech recession have hit Sunnyvale hard and those plans were put on hold in August after San Diego National Bank moved to foreclose on the mall after it failed to make mortgage payments.

AMP filed for Chapter 11 bankruptcy protection in September, hoping to stave off lien holders and keep control of the mall.

“The [redevelopment] plan is still going forward,” Verseles says. Although it is being held up because of bankruptcy issues, the city has not changed its commitment to revitalize the area, she says.

Sunnyvale already has committed $2.5 million in municipal bonds to help build new parking garages for the mall.

Compounding the problem, an increasing number of shops are not renewing their leases. In 1999, when AMP bought the mall, it was 100 percent leased; now it’s down to 30 to 40 percent occupied.

Soon, Target and Macy’s will be the only anchor department stores as the mall loses J.C. Penney, which has prominent signs telling shoppers of its store closing sale.

J.C. Penney plans to close the store by the end of the month and sell the building by year end.

Rumors are that Wisconsin-based Kohl’s Department Stores is in talks with J.C. Penney to buy the Sunnyvale building as part of a Bay Area expansion.

A Kohl’s representative says her company is not ready to announce their plans for the Bay Area.

Mall management says the rules imposed by the court are keeping some new retailers, who want into the mall, away.

“The bankruptcy court does not allow us to enter into long-term five-year leases,” says Kenneth McGee, the mall’s general manager.

Many big-name retailers demand the stability guaranteed by leases of at least five years to offset moving and renovation costs.

In addition to J.C. Penney, two smaller retailers, the San Francisco Music Box Co. and mom-and-pop clothing retailer Little Angel, also are shutting their Sunnyvale doors. Neither company would comment.

Some nearby merchants, who did not wish to be quoted, say the bad reputation of a failing mall is keeping customers away.

Mall management disagrees.

“Our very unsophisticated manual count shows [car] lots were full and traffic was up,” McGee says.

He says the WAVE’s Chapter 11 reorganization could be complete by the end of March and then the mall is back in business and the redevelopment and remodeling plans will be in full swing again.

A landlord in bankruptcy is a
risk some small-business owners aren’t willing to take.

“Many small merchants are not renewing leases because of uncertainty,” Sunnyvale’s Verseles says. “Some of the mall tenants call [the city] to see what we can do for them.”

But the city’s hands also are tied up in bankruptcy court proceedings.

And that didn’t help local shoppers this holiday season.

“Where are all the stores?” asks Sunnyvale resident Joi Tzeng, pointing to a row of empty storefronts along the mall’s southern side. She took a 30-minute bus trip to the mall for holiday shopping.

Fellow Sunnyvale resident Tracey Tibbetts was dismayed by the emptiness of the shopping mall.

“It looks like a slum,” she says. “It looks really nasty; it’s going downhill rapidly.”

Tibbetts has been following Sunnyvale’s mall redevelopment since she moved within walking distance of it three years ago.

“I know we’re in a slump right now and in five or 10 years Sunnyvale’s downtown should be hopping with new business and people,” she says. “They need to get this bankruptcy thing resolved as soon as possible.”