A FINANCIAL BLIP
A crucial deal to redevelop now-abandoned Stapleton International Airport has crashed and burned. After months of delays, King Soopers has checked out of a much-touted city plan to make the grocery chain the anchor tenant at the old airport.
Generating economic activity at the 4,700-acre Stapleton site is critical, because city financing plans for DIA call for Denver to receive up to $100 million from the sale or lease of Stapleton property. That money would presumably be used to help pay back DIA bondholders.
In a highly publicized announcement in July 1993, Mayor Wellington Webb said King Soopers had agreed to relocate its consolidated headquarters--including office, production and distribution facilities that would eventually total more than 2 million square feet--to the sprawling airfield. Webb issued a press release in which he was quoted as saying, "I can't think of a better start for Stapleton's redevelopment than this great Denver company."
But the city has made so many concessions to seal the deal that there apparently will be little cash left over for DIA. And a deal signed last January 31 between the administration and King Soopers's Kansas-based parent, Dillon Companies Inc., looks more like a simple real estate investment on Dillon's part than a commitment to Stapleton.
The King Soopers deal, negotiated by Webb's Stapleton 2000 office, has shriveled steadily since it was first announced. The administration and the company have missed two closing deadlines set by city council; according to King Soopers vice president for real estate Russ Dispense, if everything goes as planned, the current deal will close sometime this month.
In the January 31 agreement, Dillon, itself a subsidiary of Cincinnati's giant Kroger Company, agrees to purchase 152 developable acres of Stapleton land for $1,875,000 over four years--down from an initial plan to buy 196 acres for $2.4 million. It's a good deal for Dillon: The company's cost per square foot is roughly half what Denver needs to average on all Stapleton land sales to squeeze $100 million out of the airport site, and the city has even agreed to buy an environmental-insurance policy for the Kansas company. That policy, which will be paid for out of the purchase price, will cost roughly $60,000.
The city has also agreed to set aside $1.4 million of the purchase price for street work on 51st Avenue and has volunteered to cover the $144,000 real estate commission on the sale.
Dillon, however, doesn't actually commit to building anything on the site--and the only structure even contemplated at present is not a "headquarters." It's a frozen-foods warehouse that itself has shrunk to 140,000 square feet from an original projection of 250,000 square feet. The land was purchased for "future expansion and consolidation needs," says Russ Dispense. But Dispense says his Denver company has no firm plans to build or relocate anything at Stapleton; the proposed warehouse, he notes, won't even belong to King Soopers but is a project launched by Dillon, which plans to put the space up for lease.
And while the deal involves four parcels amounting to 152 developable acres, it contains escape clauses that allow Dillon to walk away from two of the four parcels--a total of 74 acres--without penalty. In that event, the purchase price would be reduced accordingly. In fact, the only payment due at closing is a first installment of $350,000--roughly one-tenth what it will cost the city this year just to maintain Stapleton.
Dillon's only definite commitment appears to be a $1 million payment to an enterprise zone fund that will be used to construct public improvements such as storm drains. That payment was originally set at $1.8 million.
"We had hoped for more and earlier development on the site," acknowledges Errol Stevens, who heads the Stapleton 2000 office. But he says Dillon "still represents a very good new owner and developer of this site."
Even in its scaled-back form, notes Stevens, the King Soopers deal represents the first major sale of real estate at Stapleton. "We think we have a very good opportunity here over a long period of time to develop this land," he says.
But for now, the airport that the city hoped would help pay for DIA is shaping up to be a money pit. According to Stevens, the city expects to lose roughly $2 million at Stapleton this year.
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