When Walmart announced Jan 15. that it would break two leases for planned stores in D.C., it torpedoed two long-promised development projects in communities east of the Anacostia River and meant the wait for fresh food on East Capitol Street would likely continue into its third decade.
Days after the retailer’s announcement, officials said Mayor Muriel E. Bowser (D)– who described herself as “blood mad” upon hearing the news — tried a last-minute save by calling Greg Foran, president and chief executive of Walmart U.S., to “communicate frustration and the importance of these two projects” according to Brian Kenner, deputy mayor for planning and economic development.
Kenner said the mayor was told a reversal was unlikely.
“His response there’s really nothing he could do,” Kenner said. “It’s not like this is a cost issue. This has to do with their larger issue nationally in particularly paring down urban markets, which they have been very specific about.”
Mike Moore, Walmart’s executive vice president of supercenters, said after the announcement that the three existing D.C. stores were underperforming and company officials didn’t feel confident the two other locations would generate enough sales. Walmart is also ending its Express concept and closing 269 stores worldwide.
Bowser’s anguish stems from how critical the stores were as the economic underpinning of two complex and expensive projects that have been floundering for more than a decade, leaving residents in poor communities east of the Anacostia feeling left behind while other neighborhoods enjoy a boom in new restaurants, shops and grocery stores. Since 2004, the number of grocery sellers in the District has ballooned from 36 to 55, according to the D.C. Economic Partnership, with three Whole Foods Markets and other new stores on the way.
Although home to nearly 150,000 people, the two sections east of the river, Wards 7 and 8, still have just three grocery stores.
The new Walmart stores would have doubled that number.
One of the stores would have ended a quest launched in the late 1990s by residents of dilapidated public housing apartments on East Capitol Street near the Maryland border for a simple place to buy fresh food.
In response to their pleadings, the city redeveloped their buildings as part of a federally backed project that officials said would include a grocery store and other shops. But it took until 2012 to sign a lease for a store — with Walmart — and construction didn’t begin until March of last year.
To accommodate the second proposed store, at the former Skyland Shopping Center located at the intersection of Good Hope Road and Alabama Ave. SE, D.C. spent 15 years and an estimated $45 million taking land there by eminent domain. D.C. committed another $40 million in tax increment financing to the project before Walmart signed a lease to open a 125,000-square-foot store there and agreed to pay a competitor, Safeway, $3.6 million beginning in 2019 to address a covenant preventing other grocers from opening nearby.
Demolition and site work are well underway, with a web cam online showing up-to-the-minute progress for eager residents. But Walmart’s store was designed to have parking built atop the store — a unique configuration that other retailers may not want. Other retailers are already being contacted but Kenner said he hadn’t yet determined how much longer construction crews could continue to work on the project before they needed to be pulled off, though the money to Safeway is contingent on a store opening.
The city and its development partners, the Rappaport Cos. and William C. Smith & Co., will also have to sort out how investors and bond holders, will be compensated for delays. The tax-increment financing was expected to paid off by sales taxes collected by Walmart and the city could otherwise be liable for those costs.
Skyland’s lead developer, Gary D. Rappaport, said he considered it the most important project in his company’s 32-year history. In addition to Walmart the first phase called for 267 apartments and 80,000 square feet of retail.
“We are as committed today as we have been at any day in 15 years and we do believe that we will get past this and we will get Skyland Town Center built and we will be successful,” he said.
The project Walmart abandoned on East Capitol Street, called Capitol Gateway, is part of a larger redevelopment run by the D.C. Housing Authority and funded under the federal government’s Hope IV program. The housing authority’s partner, A&R Development, of Baltimore, initially tried a deal with Shoppers Food Warehouse. When Walmart expressed interest A&R redesigned the project to fit the mega-retailer’s needs, adding further delay.
Finally A&R broke ground in March on the 135,000-square-foot store, a sit-down restaurant and 312 units of subsidized housing. Kenner and Adrianne Todman, executive director of the Housing Authority, said they were trying to determine whether construction of the housing could proceed without Walmart. A&R declined to comment.
“We’re examining that now but a lot of the economics were reliant on Walmart,” Todman said.
Todman said it’s understandable that residents are angry that her agency has taken nearly 20 years, with another delay on the horizon, to open a grocery store. “I was driving at the time that I heard and I won’t begin to describe the very unladylike language that I began to use at that time,” she said.
“I think it’s really about the private market,” she added. “Most merchants are profit-driven and that’s ok. And so the question is can I create an environment where the private market will not just break even but thrive?
Correction: An earlier version of this story said there are just two grocery stores open east of the river. There are three.
Follow Jonathan O’Connell on Twitter: @oconnellpostbiz