Dispute with J.C. Penney delays, could derail Westdale plans

Cedar Rapids officials raise eminent domain issue in letter to retailer

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A dispute between an anchor tenant of Westdale Mall and the Colorado company planning a $90 million redevelopment of the shopping center is delaying construction, which in turn could derail the project.

J.C. Penney Co., under provisions of its original lease with Westdale, has the right to approve or reject any physical changes at the mall.

The Plano, Texas, retailer is negotiating details of its future at Westdale, on the city's southwest side, with Frew Development Group of Denver, which is managing the mall and planning major changes to the property.

Frew Development had expected to demolish the former Montgomery Ward building this fall and begin preparation of a "ring road" and "pads" on the perimeter for new retail buildings.

Those changes have been put on hold after J.C. Penney refused to approve Frew Development's plans while it negotiates rent and other issues.

Cedar Rapids Mayor Ron Corbett and City Manager Jeff Pomeranz, in June 28 and July 12 letters to J.C. Penney representatives, urged the retail company to approve the demolition of the Montgomery Ward building as well as initial site work while it works out other details with Frew Development. The city made the letters available at the request of The Gazette.

Corbett and Pomeranz note that the city has provided a $5 million upfront grant to allow Frew Development  to demolish much of the existing mall and prepare the 71-acre site for new construction.

The city also has approved $5 million of tax increment financing revenue and created the Westdale Urban Renewal Area. The latter is expected to generate up to $25 million in incremental property-tax revenue in the first 12 years of redevelopment.

Corbett on Thursday said Frew Development and its design partner, Shive-Hatttery of Cedar Rapids, met with J.C. Penney representatives last week in Plano as negotiations continued.

"There are a couple of pieces of the puzzle that are in place and a couple of pieces have yet to fall in place," Corbett said. "There are some financing issues regarding how much the developer is putting into the Penney's building and how much the tenant will pay in new lease payments."

Corbett said the city has made it clear to J.C. Penney and Frew Development that it does not want to see the current construction season lost and have another year go by without any improvement to Westdale.

"We're putting a little pressure on both Frew Development and J.C. Penney to get this deal put together, versus one or both parties walking away from it," Corbett said. "I think J.C. Penney is probably leveraging its veto authority in the lease on the rest of the development to put pressure on the financial piece."

The city in its July 12 letter raised the issue of condemnation through eminent domain.

"We see condemnation as a last resort and it is our more sincere hope that this project will move forward without government intervention," the mayor and Pomeranz wrote in the letter.

Lisa Rowe,  Westdale general manager, declined to comment on J.C. Penney or any mall tenant, saying Frew Development had taken a step back in its efforts to complete the redesign of the mall before beginning construction.

"Our goal is that we do this in a timely manner to cause minimum disruption to our tenants," Rowe said. "Had we pushed forward with construction, we didn't feel we could get it done my mid-November, which was our commitment to our tenants."

Rowe said she still expects construction to begin in early 2014, with the demolition of the Montgomery Ward building and related changes to the perimeter of Westdale.

"Our plan has always to complete the repositioning of the project by the end of 2014," Rowe said. "We're still on target to do that."

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