City of Kenmore Announces Buyers for Kenmore Village Properties

At the City of Kenmore City Council meeting at 7 p.m. on June 10, 2013, City Manager Rob Karlinsey will recommend two buyers for the Kenmore Village commercial properties. He will present a Purchase and Sale Agreement (PSA) for the Kenmore Village Shopping Center 3.3 acre lower portion for consideration and possible approval during the meeting. The 4.75 acre upper parcel PSA remains under negotiation and will likely be presented for City Council consideration in July. Karlinsey recommends Benaroya Company and Real Property Investors (RPI) as the buyer of the Kenmore Village lower parcel. MainStreet Property Group LLC is the expected buyer of the upper lot, formerly the King County Park & Ride.

“We were very pleased to see the strong interest in these properties,” said Karlinsey. “Clearly, the investment community is bullish on Kenmore. Many other high quality buyers with strong access to capital aggressively competed for these properties.”

The two projects could bring at least $25 million in new investment to the downtown area. The new construction will include retail, office, high density residential, and a high quality, signature public gathering space. According to Karlinsey, the benefits to the community and the businesses will include:

• Enhanced development and aesthetic appeal with new construction.
• A heightened sense of place making with the public gathering space, walkable design, and other improvements.
• New quality housing near major bus lines and local amenities in the downtown core.
• More retail choices for residents and visiting shoppers.
• New office space for businesses and a resulting increase in job opportunities in Kenmore.
• A stronger tax base for the City, including sales tax during construction and ongoing new property and sales taxes after construction.

The City will likely see more than $8.2 million in direct economic value from the sale and development of these properties, including the Kenmore Camera expansion location. Direct economic value to the City will come in the form of purchase price for the properties, public improvements such as the town green, sidewalks, etc., and new tax and permit revenue to the City. Approximately 200 jobs are expected to be generated from construction.

“These are valuable new partners for our downtown,” said Mayor David Baker. “We’re glad to have them on board because they understand the City’s goals, and they want what we want.”

Real Property Investors and the Benaroya Company will partner to form an LLC called “BCC-RPI Kenmore” in order to purchase and develop the Kenmore Village commercial site. BCC-RPI Kenmore plans at least 20,000 square feet of new construction for the property with planned uses including retail, medical office, and general office space. There are ongoing discussions with potential new tenants, but no confirmed tenant announcements are available at this time.

The major PSA points include the following:
• Purchase of the Kenmore Village Shopping Center, including the Post Office building, but not including the future expansion building (former Grocery Outlet building) for Kenmore Camera.
• $1.8 million and $100,000 earnest money applied to the purchase price.
• 90-day environmental review period with a feasibility review period of 180 days.
• Real Property Investors and Benaroya will dedicate a public gathering space or town green for public use.
• The partners will construct at least 20,000 square feet of new commercial building space and at least 5,000 of which will be used for retail.

During the feasibility review period, the partners will also work to secure tenants and a more detailed plan for the site. The plan will include the location of the public gathering space or town green. Timing of new construction is tenant dependent; however, assuming tenant commitment is achieved over the six months, construction could begin as soon as summer 2014.

As for the Kenmore Village upper lot, the City Manager’s Office and real estate broker Jones Lang LaSalle (JLL) are completing negotiations with MainStreet. MainStreet is the recommended buyer based on its offer price, experience, financial wherewithal, ability to execute in a timely manner, and alignment with the City’s goals and position statement for the property. It is anticipated that the purchase and sale agreement will be ready for City Council consideration at the July 8, 2013 City Council meeting.

MainStreet plans to develop and construct at least 160 quality rental apartment units on the former park & ride site. A portion of the units will be affordable under King County definitions and in keeping with the current deed restriction for the site. Assuming the purchase and sale agreement for the property is executed in the near future, MainStreet hopes to be under construction on the site in June 2014.

Recent History

In the first half of 2012, the City began an extensive community involvement process to 1) review goals for the downtown, 2) develop a position statement for the Kenmore Village properties, and 3) establish strategic next steps to take the properties to market and thereby sell the properties to buyer(s) who would further the City’s goals and bring new investment to downtown Kenmore. The community involvement process included multiple meetings, forums, and open houses to obtain public input on the Kenmore Village properties.

Late last year, the City retained two brokerage firms to list the Kenmore Village properties for sale. JLL listed the upper lot (former park & ride), and Colliers International listed the lower lots (the shopping center). The two firms listed the properties with the downtown goals and position statement in mind, and they emphasized key points from the goals and position statement, including the importance of a community gathering space or town green. Soon after the properties were listed, 16 proposals were received, about half of which were for the lower commercial lots. The other proposals were for the upper lot or both. Colliers, JLL, the city manager, assistant city manager, and Spinnaker Strategies interviewed all potential buyers for the properties.

Based on the goals for the properties and the principles outlined in the position statement, four potential buyers for each of the properties were recommended to move forward in the process. These potential eight buyers were presented to the City Council and the public on February 25, 2013. At that meeting, public comment was invited during the discussion of this agenda item. After the February 25, 2013 City Council meeting, the city manager, assistant city manager and the brokerage firms continued follow up meetings and conversations with the finalists for each property.

Based on prices offered for the properties, financial wherewithal, experience, reputation, ability to deliver in a timely manner, and alignment with the goals and position statement, the team began direct negotiations with RPI/Benaroya for the lower commercial lots and with Mainstreet Property Group, LLC for the upper lot (former park & ride).

Additional Information

Between 1999 and 2005, the City purchased and assembled approximately 9.6 acres of downtown commercial and downtown residential property at the northwest corner of 68th Avenue and 181st Street in downtown Kenmore. The City paid a total of $8,225,000 for the properties. Kenmore Village Shopping Center Parcels In 1999, the City acquired the 0.77 acre parcel where the U.S. Post Office currently resides.

Prior to the Post Office occupying the site, the building was the home of Kenmore City Hall for the first ten years of the City’s existence. The City acquired the remaining portion of Kenmore Village Shopping Center, approximately 4.1 acres, in 2003. In 2012, the City entered into a purchase and sale agreement with Kenmore Camera for one of the buildings on the Kenmore Village Shopping Center site. This building is known as the former Grocery Outlet building and is on the northwest portion of the Kenmore Village property. The purchase agreement closed and became final earlier this year.

Kenmore Camera plans to move from its current location at the southwest corner of 67th Avenue and 181st to across the street at its newly acquired location in Kenmore Village, and building renovations are underway. This relocation allows Kenmore Camera to stay in Kenmore and expand in Kenmore. The camera store will more than triple its building square footage as a result of this move. The purchase price for the building and the parcel was $1.25 million. The 1.5 acre parcel includes the property directly in front of the building but does not continue all of the way to the sidewalk.

The City retained approximately 15,000 square feet of real estate in front of the building, between the sidewalk and the southern edge of the adjusted parcel line. With the exception of the post office, the remaining portion of the Kenmore Village shopping center includes buildings with existing tenants. These tenants are on relatively short-term leases, ranging from six-month to one-year termination provisions.

Upon closing of the purchase and sale agreement, RPI/Benaroya will take over the management of the property and tenant leases. Former King County Park & Ride Parcel The City purchased the former King County Park & Ride in 2005, about 4.75 acres. The property is currently being used as an interim location for a City skate park and also as an interim layover point for two King County Metro bus routes. Other than the above-ground skate park ramps, no buildings or structures exist on this parcel.

King County Metro is taking planning steps to eventually move the layover locations for the two bus lines from this parcel to the Kenmore Park & Ride near 73rd Avenue and Bothell Way. The City is evaluating options for a new location for the skate park and will have the structures removed prior to closing of the purchase and sale agreement.