Lowe's shows renewed interest in Calif. site

Home Channel News, May 3, 1999

NORTH WILKESBORO, N.C. - After declining a proposal to build a $70 million distribution center on a 100-acre lot in Moreno Valley, Calif., Lowe's is now reconsidering a site in nearby Perris, Calif., for its 1.25-million-squarefoot regional DC, which it plans to open by the end of next year.

Lowe's was reportedly close to signing a deal for the Moreno Valley site, but balked at the city's insistence that if the world's second largest borne improvement retailer built a new store in the market, it must be situated within the city limits.

Lee Herring, Lowe's senior vp-logistics, told The Press-Enterprise in Riverside, Calif., that a retail store in Moreno Valley is not out of the question, but that the decision would be made by a separate corporate division of Lowe's.

Moreno Valley city manager Gene Rogers reasoned that it would make no sense for the city "to provide significant assistance to a company for its distribution center and then have it locate a retail store outside the city boundaries, where it would siphon off our existing taxes." Rogers estimated that a Lowe's store, depending on its size, would produce about $200,000 a year in retail tax revenue for the city.

Rogers speculated that Lowe's feels Moreno Valley's incentive package - which includes infrastructure funding and waivers of penalties and interest on overdue property taxes - does not compensate for the property's drawbacks: Lowe's would have to shell out $1.5 million to move a gas line and it would have to deal with multiple owners to acquire the land.

The Perris site, in contrast, is owned solely by Perris Property Owners. But Jerry Unterkoefler, a spokesman for Perris Property, was skeptical about Lowe's renewed interest in the site. He told NHCN that as of April 19, Lowe's had yet to submit a written proposal. "We think what they are doing is playing games to get the city of Moreno Valley to come up with another proposal," Unterkoefler told The Press-Enterprise. Herring of Lowe's, however, claimed that he recently learned that flooding is not as great a danger in Perris as was initially thought, prompting a second look at the Perris site.

Meanwhile, Moreno Valley is indeed in the process of putting together another proposal, according to Jerry Conley, economic development senior analyst for the city. Conley told NHCN that Moreno Valley is "keeping communication open" with Lowe's.

"We're still interested in them," said Conley. He said he could not predict when Lowe's would ink a deal. "They set 'critical dates in October, then in November, December and January. All those dates have come and gone, and they still haven't made a decision." Herring told NHCN that Lowe's hopes to pin down a site by mid-May but that it has not set any "concrete deadlines."

"We keep running into stub-born issues that complicate our decision," said Herring, "so right now our deadline is 'as soon as possible.'"

In related news, Lowe's, which last month completed its acquisition of Eagle Hardware & Garden, may back out of a deal that the Renton, Wash.-based retailer made for a 650,000square-foot DC in Kent, Wash.

According to The Puget Sound Business Journal, construction firm Benaroya Co. built the DC for Eagle on a former Birmingham Steel site. Eagle recently purchased the building for about $26 million and has moved into about 100,000 square feet of it.

"We are evaluating our needs for the Kent facility," Lowe's spokesman Brian Peace told the Business Journal. Peace said that the Kent DC does not conform to the "state-of-the-art and very automated" template of Lowe's distribution network. It is also smaller than Lowe's other regional DCs, which are around 1.2 million square feet.