Plaza tenant holdout delays CVS pharmacy in Duluth

• Plaza

All but two tenants have moved out of the Plaza strip mall, which eventually will be demolished so a CVS pharmacy can be built on the site. By summer, the Beijing Restaurant will be the last business in the small mall. (Clint Austin / caustin@duluthnews.com)

Talk about it

A tenant holdout is pushing the construction of a CVS pharmacy at Superior Street and 12th Avenue East in Duluth back as far as 2015.

The Plaza strip mall on the site — which CVS purchased in October for $2.3 million — has been vacated by tenants except for the Beijing Restaurant and a State Farm Insurance office. After agent Rolf Flaig moves out in June, it will leave the Beijing Restaurant the lone occupant.

But the restaurant may not be going anywhere until its lease runs out in about three years.

Construction of the CVS store is now set to begin in 2015 due to the lease in place with the restaurant, CVS Caremark spokesman Mike DeAngelis confirmed last week.

Meanwhile, plans to build CVS stores in West Duluth and Superior are moving forward. Construction begins this month with the stores expected to open in September, DeAngelis said.

“It typically takes us four to five months,” he said of construction.

Failure to reach a buyout agreement with the Beijing Restaurant means a construction delay of at least two years for the pharmacy giant that had planned to open the store in early 2013. The delay comes as CVS, based in Woonsocket, R.I., aggressively expands into the Twin Ports market, including two Duluth stores directly across the street from existing Walgreens stores. It’s a common CVS strategy to take on industry leader Walgreens for market share and to create shopping hubs.

Besides the Plaza strip mall at Superior and 13th Avenue East, CVS purchased the SuperAmerica station on the corner of Superior Street and 12th Avenue East for $1 million. A house between the two was part of the strip mall purchase. Both the gas station and house recently were demolished for the new CVS store. Once vacant, the strip mall will be razed so the CVS store and parking lot can take up the entire lower half of the block.

DeAngelis declined to say whether the leveled corner and nearly empty strip mall will remain as is for three years, if that’s how long it takes for construction to begin.

He also declined to say whether negotiations with the restaurant owners are still ongoing, which could change those timelines.

Beijing Restaurant owner Cindy Lee declined to be interviewed. But restaurant staff have told customers that the business is supposed to be out by June or July.

Loyal customers

News that the fast-casual restaurant specializing in Chinese food could remain at the strip mall a lot longer than July was good news to regulars interviewed Friday as the busy lunch crowd was thinning out.

“This is the best place in town to eat,” said Alice Alvar of rural Duluth, who was taking home enough leftovers for a second meal. “I’ve brought a lot of my family here. I really like it here. I’ve been to other places, but they don’t measure up. People have come from the Range to eat here.”

Alvar was even planning to return to the restaurant for dinner Friday to celebrate her son’s birthday with other family members.

“This is the only place he likes to go,” she said.

Ramelle Michogof Duluth also was happy to hear the restaurant was staying put for the time being. She has been a regular for about 10 years, and it’s an easy stop while shopping downtown.

“We come here all the time, because we love the food and the prices,” Michog said as she had lunch with a friend.

OTHERS MOVED OUT

CVS, either directly or through its developer, began talks about lease buyouts with the strip mall’s seven tenants about two years ago.

“Each one of us had a little different situation,” said State Farm’s Flaig, referring to lease lengths and business plans. Flaig’s lease was one of the longest, extending to the end of 2015.

Some tenants were happy with agreements reached, some weren’t. Some wanted to get out anyway.

For Flaig, who has been a tenant for 12 years, it has worked out well.

The lease buyout reached in November will allow him to buy a house across from the Kenwood Shopping Center that he plans to convert into his new agency office. He said the monthly mortgage will be the same as his rent at the Plaza strip mall, which he has described as “decent” and difficult to find elsewhere.

“CVS was able to make this possible for me,” he said of the new site. “It would have been nice to stay here. But it’s an equitable deal for both CVS and myself. We were both excited to get it done and to know we were moving on.”

The prospect of a sleek new CVS store had the owners of the Plaza Shopping Center across the street thinking about making improvements to their parking lot. That hasn’t changed with the news that CVS won’t be building for possibly three years.

“What we do on the other side of the street is now independent of that,” said Mark Labovitz of Plaza Associates of Duluth. “I will try to get something going. Whether or not that’s this year or next, has nothing to do with CVS. It wouldn’t be because they said 2015 that we would do it in 2015. Our lot needs something more timely than that.”

Tags: business, food, restaurants, construction, duluth