The Cupertino Courier

Federated claims Vallco evaluation in the works

By Pam Marino

Federated Department Stores officials are engaged in an "alternatives evaluation" to determine the long-term plan for the company's store at Vallco Fashion Park, City Manager Don Brown said last week.

Cupertino officials have been trying since July to find out Federated's plans for the site, ever since the company quietly opened a Macy's Clearance Center in the site of the former Emporium department store. Cupertino's phone calls to Federated's headquarters in Cincinnati went unreturned until two weeks ago, when Brown held a press conference and made a presentation to the City Council about the state Attorney General's office conducting an investigation into Federated's actions at Vallco.

Federated's general counsel told Brown that the matter was being discussed "at the highest levels" of the corporation. Brown said at an Economic Development Committee meeting last week that he was told the evaluation would take about two weeks to complete.

Approximately a month ago the Attorney General's office began an investigation into possible civil anti-trust violations by Federated. Deputy Attorney General John G. Donhoff told the City Council on Oct. 6 that his office is looking into whether Federated violated an earlier settlement that was reached in 1995 when Federated purchased Broadway Department Stores. In that settlement, Federated sold some of its California stores to competitors to avoid possible monopolization conflicts. Vallco was not included in the settlement because Federated officials told Donhoff's office that the Emporium building would be sold back to the mall's owners as early as January or February 1996. Instead, the Emporium sat empty for 18 months until the clearance center was opened.

Donhoff said Federated is also being investigated for possible anti-trust violations outside the earlier agreement. Brown and others contend that Federated's actions at Vallco may have been to purposely thwart a competitor, Dillards Department Stores, from opening a store there.

There has been no indication as to how long the investigation will take.

In the meantime, Teachers Insurance and Annuity Association (TIAA), the fund that owns a defaulted loan on Vallco, is in the process of foreclosing on Heitman, the company that owns and manages the mall. According to a TIAA spokesman, the Macy's Clearance Center is in violation of a rental easement agreement Federated signed, which allows only high-end retail use in the spot. If TIAA concludes the foreclosure proceedings and takes back ownership, it will be able to file a restraining order against Federated in order to cease its operation of the clearance center. The foreclosure could be completed by the end of the year.

In place of Heitman, TIAA plans to hire the Jacobs Group to manage Vallco, the same company that owns the Cleveland Indians, Brown said.

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