Real Estate News

Whole Foods opts out of midtown Sacramento lease after developer missed ‘milestones’

An architectural rendition shows the Whole Foods project near 21st and L streets.
An architectural rendition shows the Whole Foods project near 21st and L streets.

Whole Foods Market announced Wednesday it has canceled plans to open in a highly anticipated midtown Sacramento project, citing numerous delays by the developer.

The Austin-based grocery chain was to be the centerpiece of a two-phase project that included a six-story building near 21st and L streets that would house the supermarket along with 97 apartment units.

Only last week, developer Pappas Investment announced that construction of phase one – a parking structure at 21st Street and Capitol Avenue – would start before the end of the month. At the time, there was no indication that the Whole Foods deal had gone sour.

“There were a series of milestone written into that lease,” said Beth Krauss, a Whole Foods spokeswoman. The chain was to occupy 41,000-square feet on the ground floor. “We had an option of stepping out if the developer did not reach the milestones. That’s what happened.”

Knauss declined to elaborate. She said Whole Foods is still committed to finding a location in midtown, but offered no specifics.

The project was unanimously approved by the City Council last year and was once hailed by City Councilman Steve Hansen as “catalytic.”

On Wednesday, Hansen said he hoped Whole Foods would reconsider the site, but the loss is “something we can deal with.”

“We hope to get something as good or maybe better,” said Hansen, who represents the area.

Other city officials declined to comment since Whole Foods has not yet pulled its development application.

Pappas Investment offered no details on what went wrong with the deal. Spokesman Scott Rose said in an email that the company is “actively evaluating options ” for phase two of the project. Construction for the six-story building that was to include Whole Foods was slated to begin in late 2017.

John Pappas, co-owner of the company, did not return a call seeking comment.

Rose said last week that numerous design revisions have held up construction, including the decision to scrap underground parking after feedback from area residents who feared the excavation would disrupt the community.

Richard Chang: 916-321-1018, @RichardYChang

Related stories from Sacramento Bee