Hobby Lobby is looking for a new location after its plans to construct a new store at 7510 Dodge St. — the site of a long-vacant Bag 'N Save grocery store — were rejected by Frank Krejci, owner of Crossroads Mall.
Krejci, who holds veto rights as the mall owner, challenged the project after Hobby Lobby already had made plans to close and relocate its store at 2541 N. 90th St. That store closed last month.
“I said no. It (Hobby Lobby) doesn't fit with the larger plans,” Krejci said, referring to his $350 million plan to redevelop Crossroads by tearing down the existing, largely vacant mall and building a new open-air shopping center and office spaces.
The Oklahoma-based craft retailer applied for a city permit in February 2012 to construct a new 55,923-square-foot Hobby Lobby on the site of the former Bag 'N Save, described by commercial real estate brokers through the years as one of the city's “chronically vacant spaces.”
Krejci and partner Rodney Yates, of Arizona-based OTB Destination LLC, hope to complete the retail phase of the redevelopment project by spring 2015 and have the support of city officials, including Omaha Mayor Jim Suttle and Councilman Pete Festersen, who represents the area.
The City Council has not yet approved the Crossroads Area Redevelopment plan.
The city is interested not only in the mall's revival, but also the 72nd Street corridor to Interstate 80. Omaha officials approved a redevelopment zone last year that included the four commercial corners at 72nd and Dodge Streets, stretching south to Pacific Street to include the Nebraska Furniture Mart area and west to 84th Street.
Vincent Parker, a Hobby Lobby spokesman, said in an email that the company was told 7510 Dodge St. “was no longer available for us to open a store ... due to the redevelopment plan of the mall at 72nd and Dodge. We are still actively looking to open another store in the area.”
The Hobby Lobby store would have employed up to 50 people. Employees at the 90th Street store were given the opportunity to move to other locations, Parker said. The company has four other stores in the metro area.
When contacted by The World-Herald, Festersen said he wasn't aware of Krejci's decision to nix Hobby Lobby's plans to construct a new store on the former Bag 'N Save site.
“Hobby Lobby is a popular retail store in Omaha. I'm supportive of them,” Festersen said. “But Krejci must have his reasons.”
City Planning Director Rick Cunningham said planners were “not happy” when Hobby Lobby submitted its application to construct a store at 75th and Dodge.
“We were not very supportive of that, a parcel-by-parcel redevelopment. That isn't working and obviously hasn't worked in the past,” Cunningham said. “With the redevelopment plan, you get a whole that's worth more. He (Krejci) discovered he had the veto power over the property and he said, 'No.' ”
It is not uncommon for a shopping center to have restrictive covenants, said Jerry Slusky, an Omaha real estate lawyer not involved in the projects.
But Crossroads Mall-area properties have some of the most complicated layers of ownership in the city, Slusky said.
The land on which the former grocery store, Applebee's and Best Buy sit recently became the property of the University of Nebraska Medical Center. The Lied Foundation, which had owned it for decades, donated the property in December.
University spokeswoman Dorothy Endacott said the property is intended to support the center's orthopedic surgery department, and the plan is to maintain the property as an investment.
A 99-year lease on the property, which ends in 2059, was held separately by the Alan Baer Revocable Trust.
The original owner of Crossroads Mall placed a noncompete clause on the neighboring parcel, Krejci said. Any store over 10,000 square feet wanting to locate there had to get approval from the mall's owner, said Krejci, who purchased the Crossroads for $9.5 million in 2010.
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The clause has been questioned in the past, said Steve Seline, an attorney who represented Brandeis Investment Co. in 1984 when the company sold the mall to Simon Group.
But last November, Krejci purchased the remaining 99-year lease on the property from the Baer trust, giving Krejci control over the property's current and future tenants, effectively extinguishing disputes over the clause, Seline said.
Judy Brun, a Best Buy manager, said the former Bag 'N Save has been vacant for about eight years, so she was not surprised Hobby Lobby is now searching for another location. “We weren't surprised when they pulled out.”
The proposed Hobby Lobby store would have occupied retail space overlooking a proposed two-acre public park, Crossroads Commons. Under the redevelopment plan, retail and office space would radiate outward from the pedestrian-only park.
The proposed 45-acre mixed-use development would offer retail space, a high-end hotel and could include such public amenities as a transit hub.
The parking garage and Target store would remain, but everything west of Target, including the existing Sears, would be leveled, Krejci has said.
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