Wal-Mart proposed at D.C.’s Skyland center faces obstacle: Safeway

November 28, 2011

Wal-Mart’s new plans for a store at the long-neglected Skyland Town Center in Ward 7 has a major obstacle: Safeway.

The supermarket, which is across the street from the proposed Wal-Mart site, has a covenant from the 1990s that prevents a competitor — such as the world’s largest retailer — from locating in certain portions of Skyland and selling groceries.

Mayor Vincent C. Gray’s administration is quietly trying to work out a compromise with Safeway as he trumpets his success in persuading Wal-Mart to become the town center’s anchor. Gray (D) and Wal-Mart representatives announced this month the retail giant’s plans to open six stores in the city, including one at Skyland. A year ago, Wal-Mart said it planned four stores.

At the announcement, the administration said it was trying to resolve land disputes at the Skyland site, which city officials say could be developed in 14 months. The District has spent more than $12 million settling eminent domain cases, according to city officials.

However, the Gray administration did not disclose the city’s covenant with Safeway, which dates to when the grocer closed a store at Skyland and relocated across the street. Wal-Mart plans to offer an array of grocery and food options at Skyland, including a deli counter and bakery, which could violate the covenant.

Safeway, a California-based grocer that has 15 stores in the District and is one of the city’s top private employers, said it has spoken with D.C. officials about the covenant.

“We want to be cooperative, but there is a reason that the covenant is in place to protect our interests,” said Craig Muckle, Safeway’s manager of public affairs and government relations.

At the news conference to announce Wal-Mart’s new plans, Gray said the Wal-Mart stores would help address unemployment — by bringing in about 1,800 jobs — and “food deserts.”

But Muckle said the Ward 7 area where the Wal-Mart is planned may become an oasis that can’t handle two grocers. Such proximity may not be as unusual in the suburbs, where traffic patterns could necessitate and support competing nearby stores, he said.

“In the city, with one possible exception, there is no grocery store directly across the street from another grocery store,” he said. “In a city, basically you’re looking at a store coming in a neighborhood. To have more than one . . . someone may survive; someone may not.”

Bruno Tager, who handles public relations for Wal-Mart’s plans in the District, referred questions to McLean-based Rappaport, the lead developer of Skyland.

Gary D. Rappaport, president and chief executive of the company, said he was “not concerned one bit about this restriction.”

“We have no doubt that there will be an agreement reached between the District and Safeway prior to any work being done on the site by us,” he said.

Rappaport founded his firm in 1984 and was awarded the rights to Skyland in 2002. His company owns or manages dozens of shopping centers in the Washington area, and he said such leasing restrictions are common. “These types of issues come up every time one buys a shopping center, every time one negotiates a lease,” he said.

The negotiations between the District and Safeway are being handled by the Office of the Deputy Mayor for Planning and Economic Development. Jose C. Sousa, director of communications, and chief of staff Brian Kenner said they are confident the city can resolve the covenant issue before the office delivers the site to Wal-Mart.

“There’s always been a give and take with them [Safeway],” Sousa said. “We’ve been able to work with Safeway and other retailers on thorny issues in the past.”

Muckle said Safeway has enlisted the help of lobbyist Bruce Bereano, who generally works on the company’s Maryland issues. Muckle said the company thinks Bereano could help resolve the Skyland issue.

Bereano is a friend and fraternity brother of Gray’s and has become a frequent visitor to the John A. Wilson Building since Gray took office as mayor in January.

Muckle said, “It’s a little premature to decide how it shapes itself out.” He noted Safeway’s longtime commitment to the District. “We’ve been servicing the District for 80 years,” he said. “Our closest competitor has six or seven stores.”

But Sousa said that commitment has worked both ways, with the city helping Safeway — including closing an alley recently to clear the way for a store renovation in Petworth.

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