DATE: Wednesday, November 5, 1997           TAG: 9711051189

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL  

SOURCE: BY MEREDITH COHN and JON GLASS, STAFF WRITERS 

DATELINE: NORFOLK                           LENGTH:  102 lines

CORRECTION/CLARIFICATION: ***************************************************************** Sears Roebuck & Co. operated a store in Norfolk's Southern Shopping Center until 1993. A story in Wednesday's Business News said the last Sears left Norfolk in 1981. Also, Sears operates a store in Chesapeake Square Mall. That store was omitted from the story. Correction published Thursday, November 6, 1997, page D2. ***************************************************************** SEARS RETURNS TO NORFOLK AFTER A 16-YEAR ABSENCE, THE RETAILER WILL SET UP SHOP IN A BUILDING IT WILL CONSTRUCT AT MILITARY CIRCLE MALL.

Sears is returning to Norfolk after a 16-year absence with a new two-story, 127,000-square-foot, full-service store at Military Circle Mall. The move is part of a $19.3 million investment to cement the shopping center's position in the region's increasingly competitive retail market.

Expected to be completed by April 1999, the project will also include a $5 million overhaul of an existing anchor store, Hecht's, and construction of a 20-screen multiplex theater with stadium seating, city officials announced Tuesday. The additions to the mall are expected to create 450 permanent jobs.

Besides beefing up a commercial corridor that is one of the largest employers and tax generators in Norfolk, the project introduces a financial partnership that city officials said might serve as a model to spur future private investment.

Under the plan, the city, through its Industrial Development Authority, will assist in the project's financing by returning to the mall owners a portion of the tax revenue the project is expected to generate.

The city each year would return up to 80 percent of the estimated $1.4 million in annual tax revenue as a grant, up to a total of $6.7 million, or 35 percent of the mall's investment.

The initial investment of $19.3 million will be made by the mall's owners, a pension trust advised by J.P. Morgan Investment Management Inc.

``It's a good deal for the city,'' said Rod Woolard, director of Norfolk's development department.

``We'll have additional tax revenues as well as secure the future of Military Circle and add hundreds of jobs,'' Mayor Paul D. Fraim said.

Richard C. Polley, a vice president of the mall's management firm, Urban Retail Properties, said the project would not have occurred without the city's financial incentive. Polley said the redevelopment of the mall will ``firmly plant Military Circle back onto its pedestal of strength. . . .''

Polley said the mall owners approached the city about the financial partnership. City officials agreed, eager for commercial development that would expand the tax base and protect an important corporate presence.

Sears, Roebuck & Co., the nation's No. 2 retailer, closed its free-standing store on Norfolk's 21st Street in 1981. Hoffman Estates, Ill.-based Sears has stores in Pembroke Mall in Virginia Beach and Greenbrier Mall in Chesapeake.

With Norfolk's retail outlook improving and upscale MacArthur Mall expected to open in 1999, the city announced the company would return.

Sears officials could not be reached for comment Tuesday.

After struggling through the '70s and '80s, Sears has restructured in recent years, focusing on its retail roots and targeting female consumers with renewed emphasis on apparel.

Developers will build the new Sears store on the site of the old Smith & Welton department store, which closed in 1988 and will be demolished. Sears also will build a 12,000-square-foot auto parts store adjacent to its retail store, the city said.

The theater's location has not been determined.

While Military Circle, along with its surrounding retail corridor, has suffered from vacancies and concerns about safety, it remains the second largest employment center in Norfolk. With $500 million in annual retail sales, the area accounts for 25 percent of the total taxable sales in the city.

Last year, the mall completed a $12 million renovation that included a 600-seat food court. But industry observers say the mall, which has lost market share to suburban malls in recent years, was due for a further update.

The new Sears and other improvements should solidify the mall's base of low- to middle-income customers and draw back some Norfolk shoppers, analysts said.

Industry observers say investing in the mall is a good idea for the city.

Larry Ring, a retail consultant and business professor at the College of William and Mary, said the city's investment sends a message to customers that the mall will be around for a while.

``That will solidify the customer base and encourage loyalty,'' Ring said. ``And with the money, some of the other problems will take care of themselves.''

Retail industry watchers said the strong economy is allowing the industry to expand, but a downturn will produce some casualties at the malls.

``Right now there is room for MacArthur Center and Military Circle Mall in Norfolk,'' said Mike Zarpas of Robinson Sigma Commercial Real Estate Inc. ``MacArthur will have more of a regional pull with middle- to upper-income shoppers and Military Circle will continue to cater to more of a blue-collar shopper.'' ILLUSTRATION: Color photo by Tamara Voninski/The Virginian-Pilot

Sears plans to tear down the former Smith & Welton department store

building at Military Circle Mall...

Color aerial photo by Motoya Nakamura/The Virginian-Pilot

[showing where the stores are located and where Sears will be

located...]

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