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When the Los Alamos County Council meets in special session Sept. 24, it will be almost three years to the day that councilors split the sheets with the last developer who tried to make a go of the Trinity Site.
Now, 36 months later, it’s déjà vu all over again for the county council.
North American Development Group has sized up its potential to make financial sense of the proposed development and determined it’s time to bail.
Unlike its predecessor, the Boyer Company, which spent about four years in a fruitless effort to move the development forward, NADG is moving to assign its lease agreement to the development division of Kroger, the parent company of Smith’s.
County officials say the lease assignment may be the most expedient and least messy of the various alternatives available to NADG and the county. There were a number of escape clauses written into the agreement and NADG could have exercised one of those at any given point, recouped its $250,000 in earnest money and walked away from the deal.
But, if NADG did that, the county and Smith’s would be back to square one, much as they were three years ago when the county council voted 6-1 to sever its ties with Boyer. Should the council green light the lease assignment to Kroger’s development arm, then all that’s been lost is about six months, according to county officials.
“Kroger will assume all the rights and liabilities of the lease,” County Administrator Harry Burgess said. “Smith’s has been a primary player all along, and now they will be responsible for developing the other 35,000-square-feet of retail in addition to their planned 110,000-square-foot superstore concept.”
When Boyer was excised in late September 2009, the county scrambled to reconstitute an advisory committee and the courting of potential developers began anew. It was during that process that NADG emerged as the best among a final field of four suitors who proposed vastly divergent visions of what Trinity Site could become.
“I was on the council through most of it,” said former county councilor Nona Bowman. “I believe Boyer worked hard and tried to make the project materialize, but then the economy went through a downturn and they were unsuccessful.”
Bowman expressed concerns that the county population is in decline and she believes something needs to be done to turn that around.
“We’ve got to address some of our residential issues — look at the codes — and we need to develop some incentives to get small tech companies to locate here,” Bowman said.
Where the county council will come down on the lease assignment to Kroger is anybody’s guess at this point. Insiders close to the situation indicate that the vote may be close, but they believe councilors will opt to keep the ball rolling.
One of the biggest stumbling blocks may boil down to the timeline. Once the lease is assigned to Kroger, the due diligence clock starts ticking again which could push the project start out another six to eight months. Under the current timing, NADG had indicated the Smith’s would open in 2013 with the other retail to follow. Lump in another due diligence period thrown in for Kroger, and the timing would almost certainly be pushed into 2014.
In February, the Los Alamos Public School Board and the county council met in a rare joint special session to mull approval of the lease agreement with NADG. That meeting was punctuated by often emotional testimony from a number of residents, most of who advocated for more retail in Los Alamos, a community where estimates indicate that 70-80 cents of every retail dollar is spent off the hill.
A factor that ratcheted up the complexity of the deal involved structuring the lease so that it would generate hundreds of thousands of dollars a year in revenue for an increasingly cash-strapped school district. That lease revenue could then be used to fund anything from additional teachers to general operations.
Initial rent was set at $511,000 with escalating rents to adjust for inflation beginning six years into the lease for “base” tenants and 26 years in for Smith’s.
LAPS will receive 62 percent of the revenue, escalating by two percent over 10 years to 82 percent. The agreement was expected to raise $43 million in revenues for the schools over its 73 year duration. At the end of that period, the land and all improvements are owned by the county and schools.
The Kroger Co. is headquartered in Cincinnati, Ohio, and is one of the world’s largest grocery retailers, with fiscal 2011 sales of $90.4 billion. The Kroger Co. spans a number of states with store formats that include grocery and multi-department stores, convenience stores and jewelry stores.
Smith’s Food and Drug Stores is based in Salt Lake City. Efforts to reach Steve Sorensen, vice president of corporate development, were unsuccessful. Likewise, Jonathan Gesuale, NADG’s lead manager for the Trinity Site, did not respond to a message asking for comment.
Check back to LAMonitor.com for more details on this developing story...