The J.C. Penney at the Village at Orange will shutter this summer, the lone retail store in Southern California among 138 marked for closure nationwide by the company.
Three other California stores, all to the north in Bishop, Lodi and Richmond, were part of the announcement Friday. The company indicated most of the stores would begin liquidation sales April 17 and shut in June. In a phone call to the Orange store Friday, an employee said she thought the store would close June 16.
In Orange, J.C. Penney was unable to renew its lease with property owner A&C Ventures of Sonoma, the firm’s broker, Michael Brandon, said Friday. The real estate firm, which leases property across the country to brands ranging from Rite Aid to Taco Bell, is looking for a relevant and modern retailer to fill the space, said Brandon, owner of Newport Beach-based retail restaurant consulting firm Brandon-California.
The retail space is roughly 102,000 square feet, according to CoStar, a commercial property database.
J.C. Penney’s exit comes as malls – both traditional and modern – are losing once reliable retail anchors. As consumers turn more to the internet for essentials from clothes to appliances, developers are re-thinking how to use the big-box spaces.
When Macy’s left the Irvine Spectrum last year, the Irvine Company chose to raze the building and construct a collection of smaller retail spaces.
But Brandon said A&C has no plans to demolish the J.C. Penney building. Adding restaurants or a movie theater is not on the table either, he said.
“It’s going to end up being another big-box store,” Brandon said.
Rumors of J.C. Penney leaving the decades-old mall have been flying for more than a year. In mid-2015, the mall’s previous owner, Vestar, accidentally posted conceptual plans on its website that showed a 16-screen movie complex in the J.C. Penney space.
When asked about the plans, Vestar said the drawings for The Village were posted in error. The company immediately removed the plans.
Though A&C has no plans to lease the space to a movie theater, Brandon said he wouldn’t be surprised if the mall’s current owner, Carlsbad-based TRC, considered a theater elsewhere on the property.
Last fall, after investing millions in the mall, Vestar sold the Village to TRC for $84.5 million. TRC, formerly known as Terramar Retail Centers, owns about 36 shopping centers.
The mall was 92 percent leased at the time of sale, according to HFF. Managing director Bryan Ley, who is based in HFF’s Los Angeles office, said the new owner is expected to finish upgrades started by Vestar more than a year ago.
Over the last 18 months, upgrades have included a makeover of the mall’s two main entrances. New tenants targeting a younger demographic include The Habit Burger Grill, Buffalo Wild Wings, Noodles & Co., Ulta Beauty and Jimmy John’s Gourmet Sandwiches.
The J.C. Penney closures will impact roughly 5,000 jobs nationwide, the company said. Last month it said retirement packages would be offered to some 6,000 employees.
A company map of stores indicates there are 79 J.C. Penney stores in California. A rough count in the four-county Southern California region amounted to 33 stores. The company’s store closure lists represent about 13 percent to 14 percent of the department store operator’s current store count, and less than 5 percent of total annual sales.
Local distribution hub to close
In February J.C. Penney announced plans to shutter a distribution facility in Buena Park and relocate the center to the Inland Empire.
No details were provided regarding the number of employees that would be impacted by the looming Buena Park facility closure.
The 1-million-square-foot, 24-acre compound at 6031 Orangethorpe Ave., was assessed at roughly $35 million last year, making it a valuable real estate asset for the troubled retailer. CoStar Group, a commercial real estate data provider, indicates the property, built in 1967, is used as a “hub for J.C. Penney’s West Coast operations.”
“The driver here is selling industrial facilities in Southern California,” Louis Tomaselli, a senior managing director at JLL, told the Register in February. “They could sell this million-square foot DC (distribution center) that is pretty antiquated and sell it for over $130 million.”
Tomaselli said the move to the Inland Empire makes economic sense for the retailer.
“They go sell a 40-year-old facility and then they lease a brand new facility … a brand new, state-of-the-art facility, a huge truck court. And they pay current market rates, which are well below what it would cost to operate the Orange County facility at the price level it was worth.
“This is happening all over Southern California,” he said.
J.C. Penney has been recovering from a poorly conceived reinvention plan under former chief executive Ron Johnson. Profits declined sharply in 2012 and 2013.
Mike Ullman took over the role of chief executive in 2013 and stabilized the company. Marvin Ellison became chief executive in 2015 and helped the company looks for ways to increase sales and improve its e-commerce.
The company brought in a $1 million profit for the full fiscal year in 2016, for the first time since 2010.
Ellison told CNBC that he is looking to tap into the $300 billion home services market.
The company is testing six new programs in 100 stores, allowing shoppers the ability to buy a washing machine, arrange a remodel consultation, get a haircut at the InStyle salon and pick up Nike workout gear all at J.C. Penney.
Ellison worked at HomeDepot before moving to J.C. Penney.
Other department stores
J.C. Penney isn’t the only store suffering as more consumers turn online to shop.
In February, Sears announced plans to shave $1 billion in annual expenses by selling locations, cutting jobs and putting more brands on the block.
Sears Holdings Corp., which also owns Kmart, in January announced it would close of 150 of its 1,500 stores.
Few of the closures impacted Southern California, where only a Kmart at 3001 Iowa Ave. in Riverside was slated to shutter.
Sears owns much of its retail real estate, which analysts have speculated is worth more than the brand itself.
Last August Macy’s announced plans to shutter 100 stores. Earlier in 2016 the chain announced 40 store closures, including one at the Irvine Spectrum Center.
Contact the writer: hmadans@ocregister.com or Twitter: @HannahMadans
