Highlands grocery deal collapses

May 12, 2009

By Warren Kagarise

City could allow a gas station

Issaquah Highlands residents will not be stocking up on groceries at a Central Market anytime soon. Plans to open a 50,000-square-foot highlands store in mid-2010 have been canceled due to the down economy, a project developer and city officials said last week.

Despite the slowdown, highlands developer Port Blakely Communities is in talks with other grocers and potential tenants for planned commercial space. The developer has also asked city officials to adjust their development agreement to allow construction of a gas station in the hillside community.

Blame a tough economy for the latest delay. The downturn has slowed other long-planned retail offerings in the highlands.

Port Blakely still plans to open a grocery store as part of a cluster around High Street that is slated to include a movie theater and space for shops and restaurants, said Kathy Burnaman, vice president of project development for the company. She said talks with other grocers are ongoing.

Central Market is an imprint of Town & Country Markets, which operates six groceries across the Puget Sound region.

“Due to the economy and the grocery industry, Central Market has decided not to expand here currently,” Burnaman said during a May 5 presentation to the Urban Village Development Commission. “What that does mean is that we’re currently in talks with other grocers and negotiating a new deal.”

Commission members oversee projects related to the highlands and Talus.

“Virtually all of the development in the highlands at this point has been residential,” Vice Chairman John Milne said.

He acknowledged the impact of the recession on development and asked Burnaman whether Port Blakely intended to develop commercial space along High Street.

“The market is going to drive what can be there,” she said, adding that the first businesses to open as part of the complex would help set the tone for future development.

She also addressed the delays related to the project: “No one wants things to move more than Port Blakely.”

She said a grocery store would be part of the first phase of new commercial development in the highlands.

“We will have a grocer in Phase 1, but we don’t have a name to announce today,” she said.

In addition to the grocery, plans for Phase 1 call for construction of a movie theater surrounded by retail space and restaurants. Plans also call for construction of a parking garage with about 545 stalls.

“Leasing is very positive right now,” Burnaman said. “It’s slower than we would like, but it’s good considering what’s happening nationally.”

She said Port Blakely would continue to work on site plans and seek city development permits, although financing for the project has been tough to secure amid the recession.

“While today, a construction financing package is not available to a project our size, we do anticipate having something available to us by early next year,” Burnaman said.

Another highlands development — zHome, a townhouse complex designed to produce as much electricity as it consumes — has also been put on hold because of financing delays.

Port Blakely executives have also asked city officials to consider adjusting their development agreement to allow construction of a gas station in the highlands.

“This is a resident-driven request much more than a company-driven request, although the gas station operators, like the residents, have been calling the company pretty regularly over the years,” Port Blakely President Alan Boeker said.

He answered questions from the Council Land Use Committee about the proposal May 5.

When the agreement was drafted, officials said they worried that contaminants from a gas station could infiltrate the nearby Lower Issaquah Valley Aquifer, because of the location of the development and the geology beneath the site.

Councilman David Kappler, a Land Use Committee member, said concerns about contamination lessened as the highlands grew.

“We know now there’s a lot of clay there,” he said. “We also know that if it [runoff] does go down, it tends to go sideways.”

Should the agreement be amended, Boeker said he envisions construction of a gas station consistent with the surrounding neighborhood. He said Port Blakely would likely set guidelines for a gas station operator to open in the highlands.

“They would need to go get corporate support for a special station,” Boeker said. “It wouldn’t be the Klahanie Shell. It would be something of a different design, it would have the real current environmental protections, it would be an environmentally-sensitive building. There would be a variety of fuel offerings consistent with kind of whatever the state of the art is.”

Port Blakely would need to research options before setting limits on gas station operators, Boeker added.

The Land Use Committee will consider legislation to amend the agreement next month.

Council President Maureen McCarry, another Land Use Committee member, asked whether the proposed standards would dissuade operators.

“My worry is that in these economic times, putting too many conditions on where they may not see that much revenue come out from it whether it’s going to be used or not,” she said.

Urban Village Development Commission Chairman Geoff Walker moved to the highlands in October 1998. Walker said a gas station could be a good fit for the community.

“A well-placed and well-designed gas station and associated services would be welcome,” he said in an interview.

Walker and his neighbors have long lamented the lack of a grocery store and other retail offerings in their hillside community. He said highlands residents deserve an explanation and a construction timeline from Port Blakely.

“I think there are a lot of people who came to the highlands under the guise of a live, work and play community,” Walker said.

He said the highlands are still attractive to businesses regardless.

“The opportunity exists in the highlands,” Walker said. “I’ve always believed it and I still believe that.”

Reach Reporter Warren Kagarise at 392-6434, ext. 234, or wkagarise@isspress.com. Comment on this story at www.issaquahpress.com.

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