A real estate deal touted by Denver city officials as key to the redevelopment of Stapleton International Airport suffered another blow last week when the King Soopers grocery chain missed a second closing deadline.
King Soopers officials have told the Denver City Council that the company needs more time to evaluate potential groundwater contamination on 196 acres of city land near Havana Street and 51st Avenue.
In what appears to be a last-ditch effort to salvage the deal, the city, which federal officials say may have contributed to pollution itself via spills of aviation fuel and other chemicals, is now exploring the possibility of indemnifying King Soopers against future claims at the site--or even buying the company an environmental insurance policy. City airport attorney Cathy Gale says Denver is getting quotes on such insurance and is examining legal issues surrounding indemnification. Errol Stevens, who heads the city's Stapleton 2000 redevelopment arm, says it's too early to estimate the cost to taxpayers of such an effort.
Earlier, King Soopers had announced that its own environmental probes had uncovered no problems with the site. But the company's vice president for real estate, Russ Dispense, says a recent lawsuit filed by the U.S. Army against Scott's Liquid Gold, a national firm that maintains a production facility near 48th Avenue and Havana, has raised fears that King Soopers could end up being dragged into court if it buys land at Stapleton.
The Army, in its suit filed September 8 in U.S. District Court, claims that Scott's helped pollute groundwater that the Army is paying to clean up. It wants a federal judge to force Scott's to help fund clean-up efforts in and around the highly contaminated Rocky Mountain Arsenal. Scott's has denied the Army's allegations and says the lawsuit is without merit.
According to Stevens, King Soopers now "wants some more time to evaluate data." The city agreed to extend an October 24 deadline, adds Stevens, because he and other officials "need some more time to develop ways to give them comfort on the issues that they're coming up with."
The city and King Soopers announced in July 1993 that the grocer planned to buy 185 acres at Stapleton and use it to build a $100 million distribution center and headquarters complex that would employ up to 3,000 people. The deal was presented by city officials as an economic masterstroke that would attract other tenants and help prevent Stapleton from becoming a vacant eyesore once the airport shuts down.
King Soopers officials have since distanced themselves from a headquarters relocation, stressing that a move to Stapleton would have to be incremental and still isn't a sure thing ("This Little City Went to Market," September 7).
Generating new economic activity of some kind at the 4,700-acre Stapleton site is crucial to the city because the financing plan for Denver International Airport calls for $100 million in revenue from Stapleton redevelopment. The city has bent over backward to make the King Soopers deal happen, agreeing to a purchase price well below the fair market value assessed by the Federal Aviation Administration.
The city council formally approved King Soopers as the first new Stapleton tenant last August, and it was announced that construction on a scaled-down frozen-food warehouse would begin in sixty days (the FAA has said King Soopers doesn't have to wait until the airport closes to begin operations). A deadline of September 23 was set for King Soopers to complete its "due diligence."
After King Soopers balked at closing the deal, the council extended the deadline to October 24. That date also came and went without a commitment from King Soopers, which instead asked for a new extension. Late last month, the council set a new deadline of February 28. City officials say it is a coincidence that the date matches the latest proposed opening date for DIA.
King Soopers knew there was a plume of contaminated groundwater beneath Stapleton when it initially agreed to the land purchase. And one Stapleton official questions whether the Scott's Liquid Gold suit completely explains King Sooper's reluctance to close the deal.
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"My impression is there aren't a lot of new technical issues on the site," says Tom Gougeon, chief executive of the Stapleton Redevelopment Foundation, which is working on a master plan for the property. Gougeon says he wonders if "business issues in the King Soopers hierarchy" may also be a factor.
Dispense, however, says his company merely wants to protect itself from "potential Superfund liabilities." (The Stapleton property is not a Superfund site, but it is close to the arsenal, which is.) Asked if the company has made a business decision not to buy the Stapleton land, Dispense says, "That may very well happen at some point, but that's not the reason for the delay at this time."
Even if the land purchase does happen, it's questionable how much revenue it would generate for DIA. The negotiated sales price for the 196 acres is $2.4 million. Those payments, however, will be spread out over five years, and King Soopers has an option to decline the purchase of 24 of the 196 acres. The city, meanwhile, has agreed to spend $1.4 million of the proceeds on street improvements and to pay a $270,000 real estate commission.