Mendelson defends D.C.'s support for Wal-Mart, but vows more scrutiny

The District's efforts to help the developers of Skyland Town Center land an anchor retail tenant — to the tune of $90 million — were justified, but now the D.C. government needs to look closely at what went wrong and whether it can protect its interests following Wal-Mart's decision not to go forward with a planned store there or at Capitol Gateway, also in Ward 7.

That is according to D.C. Council Chairman Phil Mendelson, who noted the District has been committed under at least three mayoral administrations to help Skyland bring an anchor retailer to the 18-acre site by Good Hope Road, Alabama Avenue and Naylor Road SE east of the Anacostia River. A joint venture including the Rappaport Cos. and WCSmith have been planning the project for years.

"We had a commitment from them to go to Skyland, and the importance of Skyland can not be overstated," Mendelson said. "We knew that Skyland is very difficult to market. That is why the District government agreed to put $90 million into the site."

After opening a trio of stores in the District over the past two years, including its first at 99 H St. NW, Wal-Mart (NYSE: WMT) said Jan. 15 it had completed a strategic review of its portfolio and pipeline and determined opening the two additional stores was "not viable at this time." The decision, part of a lager announcement in which the world's largest retailer said it would close 269 stores across the globe, drew sharp criticism, including from a "blood mad" D.C. Mayor Muriel Bowser.

The District's $90 million commitment to the project includes a $7 million D.C. grant, roughly $40 million in acquisition and relocation costs, and $40 million in tax-increment financing, on top of helping to secure $55 million in overseas investment via the federal government's EB-5 Immigrant Investor Program, and it remains to be seen whether it will be able to recover any of that support. Also unclear is whether the decision is one Wal-Mart could revisit or whether the District or the Skyland and Capitol Gateway developers can take legal action against the company.

Mendelson, in an interview late Tuesday afternoon, said he does not yet know what protections the District, or developers, built into the deals to protect their interests. That includes examining whether there were any clawback provisions placed on the District's agreement late last year to pay Safeway $900,000 a year for the next four years to eliminate a restrictive covenant the supermarket chain in the event Wal-Mart opted not to open at Skyland.

"Obviously, in retrospect, it's clear that the District should have included a provision so that the District could be made whole," Mendelson said. "We don't know what the legal documents say. There's always an out. The question is whether there are damages.

"I want to find out how the District protected itself and I hope I am not disappointed," added Mendelson, who noted the council plans to take a closer look at the situation at an oversight hearing on economic development in March. He also plans to meet with Brian Kenner, D.C.'s deputy mayor for planning and economic development, later this week to review the situation.

At this point, Mendelson said he does not hold out much hope of Wal-Mart deciding to go forward with the new D.C. stores given its very public and surprising announcement. He also said he would consider it futile for Bowser or a delegation from her administration to make the trip to Wal-Mart headquarters in Arkansas to press the District's case further, a notion former Mayor Vincent Gray suggested in an interview with The Washington Post.

"I think it would be a fool's errand to go to Bentonville, Arkansas, to try to change their mind," he said.

http://www.bizjournals.com/washington/breaking_ground/2016/01/mendelson-defends-d-c-s-support-for-wal-mart-but.html

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