Opinion: Why Safeway Is a Good Fit for Sycamore Crossing

By Chris Kelley

Our Hercules residents want and need a large, modern lifestyle grocery at which to shop, and Safeway is the right kind of mid-market store for our solid middle class community.  Our residents also want to buy gasoline at very good prices, and Safeway will build a fuel station with sufficient pumps that meet our needs. 

Many people like myself do not currently shop for food or gas in Hercules, but we will eagerly do so if this Safeway project gets built.  Safeway has a proven track record of conceiving and constructing attractive retail developments with a supermarket, fuel station, and additional retail spaces for tenants.  Safeway will bring in a second anchor or two, create a nice plaza in the middle of the shops, include a walkway that extends from the back parcel down to Sycamore North/Town Centrale.  Safeway will build a bridge over the creek so that the two parcels making up Sycamore Crossing are connected.  Safeway will work with our citizens to create a successful retail project that meets our city's needs.  

Moreover, a most important consideration in this deal is that since PDC/Safeway self-finances, they do not have to borrow money from banks to build their developments. They can move fast and get the project going sooner than most development companies could.

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As to the specifics of the PSA, the price of $5million for the property is reasonable considering the fact that Safeway will now build an urban style design with rooftop parking, which costs far more than a regular suburban store design.  Remember that the money Safeway pays for this property will NOT go into city coffers, but instead will go to pay off RDA debt.  And the sooner this project gets built on Sycamore Crossing, the sooner the increased property tax increment from the built improvements on the property get sent to pay off more of that RDA debt.  That should please the state of California.

Safeway will also spend $1.2million in hard costs for building the car & pedestrian bridge, plus more money on soft costs for architects, engineering consultants, etc. required to do the bridge design and get it through environmental approvals.  Safeway will create a trail along the creek so we will be able to enjoy the natural waterway aspects of the property.  I doubt that any other developer would have the wherewithal to do this.  

As we all know, Sycamore Crossing needs to have the stockpiled dirt on it removed and utilities put underground.  In September, Safeway heard our questions about the cost of doing dirt removal and utility undergrounding and has responded by reducing the Holdback amount in the PSA.  The Holdback is now just $3million, down from $4million and/or 150% of the estimate of all dirt removal costs.  Meanwhile, our city manager is actively looking for someone to just take away the dirt, since construction projects in the Bay Area may need dirt soon.

In addition to meeting our resident's desire for more retail in Hercules, the Safeway development project in total will bring in sales tax, utility user tax, and franchise fees to the city, for at least the next 30 years.  There is a study on this in the PSA.  I think we could safely say that Hercules can expect this revenue stream to be at least $500,000/year, once the entire project is up and running.  Our city badly NEEDS this income as soon as possible.  We need to stave off city bankruptcy, and keep our city services intact--including our much beloved Hercules police force.  Bringing in the Safeway project now will go a long way toward ensuring that the city becomes financially solvent.

Now, Safeway has said that they will only build on Sycamore Crossing and not on any other parcel in Hercules.  As experienced commercial developers, they know that Safeway at Sycamore Crossing is perfectly situated for the sale of their kind of basic necessity retail.  After all, everyone needs to purchase food.  With Safeway in the center of town, it will have visibility from the freeway, easy access from San Pablo Avenue, plus "walkability" from apartments & restaurants planned for Sycamore North/Town Centrale, and from the Bayside homes.  This synergy will create just the kind of active shopping experience Hercules has long been wanting.

Another reason this Safeway project is crucial to Hercules is that we are just emerging from a horrific experience of past city corruption.  As a result, outside business people, the public, and real estate developers have viewed our city as a bit crazy and difficult to deal with--a place to stay well way from.  But if retail developers see that Safeway is coming to Hercules, then other businesses will be encouraged to come here, too.  Having Safeway in Hercules will have a tremendously positive effect on attracting other retail.  Good stores well situated attract more good stores. Safeway at Sycamore Crossing will encourage the building of better commercial development on the Market Hall site.  And this will help draw in good retail options for Hercules Bayfront, LLC's waterfront development, when that gets going. 

Here is something else to reflect on: The last retail developer to open in Hercules was Home Dept in 2003.  Despite the public's continuous clamor for all sorts of well known retail brands and the best efforts of the city to draw in quality retail to Hercules over a ten-year period, nothing else has been built.  PDC/Safeway is the only serious developer to have come to us with a good quality retail plan in the last ten years.

We need to understand our city's position retail-wise and see how others see us. First, in the eyes of developers, Hercules is that small city of 24,000 with the cute houses, not at all wealthy (i.e.,not a lot of disposable income), and essentially suburban.  Second, there is competition in our "market area."  Our neighboring city, Pinole, gets all the major retail stores in its strip malls along Hwy 80.  Third, we are surrounded by several less affluent communities in West County.  In sum, in the minds of retail developers Hercules does not have the demographic purchasing power of a Walnut Creek, a Berkeley/Albany, or even a Lafayette.

A few days ago the Contra Costa Times ran a story about current growth in retail development and it mentioned several major chains as open to investing in communities.  Here is how I responded to the stores listed:

--Target - It is already on Fitzgerald.

--Safeway - Excellent.  Wants to come to Hercules.

--Whole Foods - We don't have the required demographics of a population of 200,000 or more within a 20 minute drive time.

--Walmart - We fought it (for very good reason, I'd say) and it will not come back.

--Jamba Juice - It is already in the Pinole Valley Shopping Center.

--5 Guys - It is already in the Pinole Valley Shopping Center.