Mall Talk Overcoming Doubts, Northtown Changes Face Of Spokane Retailing

For North Side resident Bert Mihara, the decision to shop at NorthTown Mall boils down to simple practicalities.

“I have a big van. I can’t park it downtown or on the street anywhere,” said Mihara.

“And my best friend is in a wheelchair, so he just loves this place - he’s inside, out of the weather, and it’s got elevators. It’s just very convenient all the way around.”

Copious numbers of consumers like Mihara spent $225 million at NorthTown last year, catapulting the mall’s J.C. Penney and Sears stores to No. 1 in their Western divisions. The mall also pays $50 million in yearly wages to more than 1,800 people who work there.

Those are just some of the numbers that Sabey Corp. officials cite as evidence their $100-million dollar mall renovation project, begun six years ago, has been a success.

Since its grand re-opening in 1991, NorthTown has shaken up the region’s retail base, attracting national franchises such as The Bombay Co., Victoria’s Secret and Mervyn’s that had ignored Spokane. Other franchises - such as The Gap, The Limited and The Bon Marche - opened a second Spokane store at the mall.

But more than any retail fait accompli, NorthTown has come to represent a sea-change in the retail structure of Spokane. A city’s first super-regional mall often changes the way people congregate, shop and think about their community; these changes often cause city leaders to ask critical questions about the local economy, experts say.

“A mall changes the face of retailing in a given area,” said Mark Schoifet, director of communications for the New York-based International Council of Shopping Centers. The ICSC is a non-profit organization of 28,500 shopping-center owners, developers and retailers.

“The little retailers have to find a way to compete with that superstore. The mom-and-pop store on Main Street has to change the way it provides goods and services - it has to be done to compete with the mall,” Schoifet said.

It’s common for a city’s first major mall to become a catalyst for economic debate, he said.

Often, a population grows without a city’s retail base expanding accordingly. When developers finally erect a mall, the previously weak retail base may become saturated, Schoifet said.

The mall serves as the most visible reminder of a city’s growth, often forcing community leaders to reevaluate the city’s economic foundation and the region’s capacity to endure growing pains, he said.

All of these issues - and several more - have been debated as Spokane and NorthTown have expanded.

MALL’S ROLE HOTLY DEBATED

Despite the mall’s popularity with shoppers and a 96 percent occupancy rate, retailers and city leaders hotly debate the success and future of NorthTown, originally built four decades ago as a wood-framed, one-story shopping complex.

Although the discussion often is framed in terms of NorthTown vs. downtown, retailing experts say a strong downtown and successful regional mall are not mutually exclusive goals. Indeed, for more than three decades downtown and NorthTown peacefully co-existed.

In 1954, more than 50,000 shoppers gorged the eight-store shopping center within the first two days of the store’s grand opening; sales receipts totaled $10 million for the first year, according to newspaper records.

NorthTown and downtown were quietly sharing equal parts of Spokane’s retail market only seven years ago. In 1988, 58 percent of consumers in Spokane County purchased goods at NorthTown and 53 percent had shopped downtown, according to the Belden Continuing Market Study of 1988.

It wasn’t until about five years ago that rumors of financial instability and a plot to ruin downtown began swirling around NorthTown.

That was shortly after Seattle millionaire David Sabey bought the antiquated mall and promised to double its size with a $100 million renovation that would add a second story.

Sabey bought NorthTown in 1988. By 1991, the mall’s occupancy rate had sunk below 75 percent. A year later, the painful demise of downtown hallmark Frederick & Nelson - which Sabey bought in 1989 - fueled rumors that Sabey Corp. was waging an attack against downtown to feather his NorthTown investment.

These events took place just as Spokane was starting a period of rapid economic and population growth. Sabey was one of the first of dozens of out-of-town business people to see opportunity here.

“He certainly is an outsider in the sense that he came into Spokane with a pretty aggressive concept,” said Mayor Jack Geraghty, who was an independent public relations executive at the time.

“Some people may have thought he did it to kill downtown, but he did it to make money. He recognized there was a market for a shopping center of that size here,” Geraghty said.

Early this year, NorthTown crossed a threshold when it landed permanent financing through The Teachers Insurance & Annuity Association-College Retirement Equities Fund. The financing allayed some skeptics’ suspicions of financial instability and mismanagement, but rumors persist.

A small group of NorthTown retailers is suing Sabey Corp., claiming the management is levying excessive common area maintenance fees to fatten dwindling corporate accounts.

Rumors about Sabey’s financial health still percolate among these tenants, who say the company is attempting to profit from the fees instead of merely passing on the cost of janitorial and maintenance services.

Schoifet said such acrimony is common when a super-regional mall takes on an under-retailed market such as Spokane was five years ago.

“Before a city’s first supercenter is developed, retailers can get away with doing things in a mediocre way and still make a profit. The competition makes them work harder. You get a sense of resentment,” Schoifet said from the shopping center council’s New York office.

Other retailers say sales in the high-traffic mall compensate for pricey leases. Depending on location, monthly rates at NorthTown can run from about $30 to $50 per square foot, according to mall management.

“Before Sabey came in, this mall was just a little strip mall. Now it’s better, and there are certain expenses that go along with that,” said Michael Schlesinger, co-owner of Street of Dreams and Nature’s Kingdom on the mall’s main floor.

Some say the mall’s sour reputation in the eyes of downtown boosters stems from Spokane’s less-than-cordial welcome to outsiders in general, West Siders and Sabey in particular.

Many people associate Sabey with two notorious downtown upheavals: the J.C. Penney pullout from downtown in 1990 and the 1992 bankruptcy of Frederick & Nelson, which traced its roots back to Spokane’s oldest department store - The Crescent.

When the downtown J.C. Penney moved to NorthTown in 1991, it was one of the last Penney’s to leave a downtown location. Officials said it was part of an overall corporate strategy and wasn’t specifically due to NorthTown wooing the store.

Sabey bought F&N in 1989. Despite sinking $50 million into the store, he announced in 1992 that he couldn’t save the troubled store.

“His reputation is a knee-jerk reaction to events that were out of his control. Dave’s never showed any proof of Machiavellian attacks on downtown,” said Don Barbieri, downtown real estate developer and president of Goodale & Barbieri Cos.

Others - especially retailers downtown and a handful at NorthTown - hurl expletives at Sabey, one calling him “the man who killed downtown,” another deeming him “an awful landlord.” None would talk on the record for fear of financial or social harm.

Regardless of Sabey’s reputation with retailers and city leaders, the average Spokane shopper probably doesn’t even know who Dave Sabey is. Consumers don’t particularly care about downtown viability, NorthTown’s finances or its owner’s image, shoppers said.

“I don’t know about his reputation,” NorthTown shopper Mihara said. “I’m retired, so I don’t pay much attention to that. What do I care? I just shop here.”

That’s exactly what NorthTown wants to hear. The mall takes a lowkey approach to public relations. It prefers to shun media whenever possible and concentrate on shoppers, said Laurent Poole, executive vice president of Sabey Corp.

“We don’t really see much of a point in trying to clean up or alter our image here. Our philosophy is to service the customer, make the customer shop here more often and make new people want to come here. That’s it,” Poole said.

MORE STORES MEAN MORE TAX DOLLARS

In serving shoppers, NorthTown has also served city, county and state coffers. The mall represents an annual economic impact of nearly half a billion dollars to the local economy, according to a 1994 appraisal by a San Francisco-based research group.

It was also the city’s fourth largest taxpayer last year, contributing more than $1.5 million in real estate taxes.

Still, some Spokane residents - especially those with an economic stake downtown - aren’t convinced NorthTown’s numbers add up.

Some of NorthTown’s success has come at the expense of other retailers, they say. The economy benefits when total sales increase, not when one business gains at the expense of others.

And, with a major redevelopment proposal moving forward for downtown, NorthTown might have to fight to maintain its gains.

“The jury is still out on how successful NorthTown will be as a super-regional center,” said Barbieri, whose company redeveloped Crescent Court in the former F&N building downtown and is currently working on Riverpoint Village on the banks of the Spokane River.

“Certainly Dave (Sabey) has been a success. But I don’t know if people in the Inland Northwest will view him as successful over downtown.”

Experts agree that both shopping entities can succeed.

“Small mom-and-pops and downtowns are thriving in the shadows of huge malls. There’s no reason why the two can’t exist together,” Schoifet said.

Others say the real losers will be small NorthTown retailers - especially local merchants, some of whom will have to fold or relocate under intense competition from national franchisers within the mall. Only national franchises will survive in the mall, they say.

“What’s really shaping up is that independent tenants are becoming fewer in the mall and major chains have become more of a presence. It has to do with the margins those stores work on. For them, it’s just a way of doing business,” said Jim Pounder of Pounder’s Jewelry.

Pounder’s, 3131 N. Division, had been a mall staple since 1957 when it relocated in 1994 because of the expensive lease rates in the mall.

“We needed a greater mark-up on prices to survive there. We’re an old-fashioned store trying to deal on the same margins we used to have, but we couldn’t survive in a shopping center,” Pounder said.

Pounder’s experience amidst several cut-rate, national jewelry chains at NorthTown is typical: Many independent store owners face herculean struggles to survive.

The number of retail entrepreneurs willing to take that risk - and those succeeding at it - has been declining for years, and the 1990s will bring even greater fallout, according to the May issue of Shopping Centers Today magazine.

“In the next decade, retailers will fall into two categories: those that are lean, mean and customer-driven, and those that are gone,” said Stanley Logan, a Chicago consultant with Arthur Andersen & Co. who was quoted in the article.

For retailers to prosper in a hyper-competitive mall, they must identify and pursue a unique customer market and offer impeccable customer service and an attractive storefront. They must also frugally manage their budgets and negotiate favorable terms from vendors, suppliers and landlords, the article stated.

In fact, many local retailers at NorthTown say profits have been constant or are on the rise because they have done just that.

Schlesinger’s Street of Dreams reaped enough profits at the mall last year that he decided to double the store’s square footage. He and his wife also began Nature’s Kingdom, the store next-door specializing in unique, nature-related products such as T-shirts emblazoned with endangered species, wind chimes, collectibles and sculptures.

“Look around at the store fronts. Some look like they haven’t been redone in decades. The only tenants who haven’t done well are those who keep operating like they did 15 years ago,” Schlesinger said.