HAYWARD - based retailer Mervyn's has dropped out as the anchor of the proposed East Gate shopping center, to be replaced by a Target store at the Story and King roads intersection.

Jerry Hunt, president and co-founder of Blake Hunt Ventures, on Friday said the $35 million project should be under construction by fall.

"At one point, we were pleased to have Mervyn's. I think Target as the anchor will be tremendous," said Hunt, whose company is developing the 16.5-acre site east of the Tropicana Shopping Center.

Mervyn's parent company is Target Corp., so it wasn't difficult to make the leap, he said.

"I view this really as a seamless transition. We've been working in lock-step with Target for a long time,'' he said. "The project is very much alive and we start construction this year."

Hunt also said the change of plans means that the site, which was originally slated for a 150,000-square-foot shopping center with a Mervyn's anchor, now will grow to a 190,000-square-foot center with the new Target.

And, he said, unlike Mervyn's, Target will offer not only retail goods and apparel but also services.

Hunt said the city's studies have shown that more than $300 million in annual retail sales leaves the community where the new Target will be located.

"The East Side has been grossly under-served and has been overlooked by developers and the retailing community for a very long time," he said. "We're delighted to be a part of a project that will help this community realize this goal."

John Weis, deputy director of the San Jose Redevelopment Agency, said the agency -- which owns the land -- has not yet transferred the site to Blake Hunt.

Target gave notice last month that Mervyn's would not be at East Gate, Weis said. No reason was given for Mervyn's exit, but Weis said the retailer had hit "rocky roads."

Blake Hunt was scheduled to take over in February. The agency's board authorized taking over the site by eminent domain in April. As of January, the agency had spent $26.8 million for acquisition of the East Gate property and other associated costs.

Mervyn's, a department store that caters to the mid-level retail market, has seen its revenue drop for three years. Last year, profits fell by nearly 7 percent.

Originally, Mervyn's had planned to move its store at Story and White roads to East Gate, about one and a half miles away.