Downtown Kroger store to anchor 18-story residential tower at Court and Walnut

Kroger CEO wants to be part of Downtown's progress
Posted at 12:59 PM, Jun 06, 2017
and last updated 2017-06-06 17:44:51-04

CINCINNATI - The Kroger Co. has selected a 1.2-acre parking lot one block east of its corporate headquarters as the site for its long-planned Downtown grocery store. It will be part of a $90.5 million development that also includes 139 luxury apartments and a 550-car garage.

Kroger unveiled the project Tuesday in a joint press conference with city officials and Cincinnati Center City Development Corp., or 3CDC.

The 18-story building will feature a 45,000-square-foot grocery store, with its front door at the corner of Court and Walnut streets. A second-floor bar and food hall will feature outdoor seating on a deck overlooking Central Parkway. The food hall concept is a regional first for Kroger, providing an ever-changing mix of local restaurants and food vendors to satisfy the dining needs of Downtown workers and residents.

“Cincinnati has been home to Kroger since 1883. We love the city,” Kroger CEO Rodney McMullen said. “It’s exciting to see all the progress our great city is making and to be part of that progress and support the city.”

3CDC said the project is a chance to connect the rapidly developing blocks around Washington Park to the hundreds of new housing units now built or planned in the southern half of the Central Business District. It expects the store to draw shoppers from Mt. Adams, Downtown, Over-the-Rhine and the West End, boosting streetcar and pedestrian traffic in the process.

“We’ve been talking for a long time about finding the right opportunity,” said Adam Gelter, executive vice president of development for 3CDC. “This is not just a standalone grocery store but a chance to impact that entire area.”

A rendering of what the Downtown Kroger's main entrance at Court and Walnut streets will look like. Provided by GBBN Architects.  

Cincinnati City Council will be asked later this month to approve an $8.5 million city grant for the project. In August, council will consider a tax-increment financing plan that would divert about $400,000 in annual property taxes to cover parking costs for Kroger customers.

Under the plan, the city would set up a special taxing mechanism known as a project-based tax increment financing, or TIF. It lets a property owner make payments in lieu of taxes that can be used to offset project-related costs. Kroger would pay about $12 million over 30 years into the TIF. Those proceeds would then be used to reserve two of the garage’s eight stories, providing 140 spaces so Kroger customers can enjoy free parking while they shop.

Residential developers – a partnership between North American Properties, Rookwood Properties and NorthPointe Group -- would also receive a project-based TIF, but those details have yet to be finalized. The garage and residential tower are expected to cost a combined $69 million, with the city grant covering $8.5 million and housing developers contributing up to $8 million in equity. Bank loans, a state loan and a loan from 3CDC's corporate-backed revolving loan funds will cover the remaining cost. The eight-story tower will fetch rents of up to $3,000 a month for its biggest units of 1,400 square feet.

Residential units will start on 11th floor of the new Kroger building at Walnut and Court streets Downtown. Provided by GBBN Architects. 

NorthPointe partner Rick Kimbler said the new Kroger store and Cincinnati's streetcar will be marketed as amenities to the project. He expects it will draw young professionals and empty nesters who want to live close to work and be near the excitement and energy of Over-the-Rhine.

“That imaginary line that divides the Central Business District from OTR is disappearing,” Kimbler said. “We think that’s a plus.”

Apartment residents will have access to one garage space per unit, but will have to pay market rates for those spaces. The city-owned garage will be controlled by 3CDC under a master lease arrangement that’s similar to garages at Fountain Square and Washington Park.

Kroger will invest about $19 million in the new Downtown store, with an additional $2.5 million in construction costs covered by New Markets Tax Credits. That’s a federal program that lets investors buy tax credits from the U.S. Treasury, with the proceeds used as equity contributions to private developments in low-income census tracts.

Because the site is not in a low-income census tract, Kroger has opted to satisfy tax credit requirements by pledging to hire low-income residents to fill at least 60 percent of the 160 jobs it will take to operate the store.

Kroger plans to close its Over-the-Rhine store at 1420 Vine Street, transferring its 60 employees to Court and Walnut. It will donate the Vine Street store to 3CDC so the site can be redeveloped.

A rendering of what will be the view from Central Parkway and Walnut streets. Provided by GBBN Architects. 

Measuring the impact

The project is an endorsement of Downtown’s rebirth as a residential neighborhood, with 17,717 people now living in the 45202 ZIP code and more than $300 million in new residential projects now planned or under construction. Kroger expects to draw from more than 21,000 households between the Ohio River and Findlay Market by the time the store opens in 2019.

Last June, Cincinnati Economic Development Director Oscar Bedolla told WCPO that grocery retailers would be reluctant to invest in Downtown until its population climbed above 20,000. Kroger's CEO was encouraged by the expectation of continued residential growth in the urban core, not just the head count in the city's center.

“There wasn’t a specific magic number,” McMullen said. But “obviously, when you start getting to 20,000, it works a lot easier to have enough business that works.”

The site will have “a good symbiotic relationship” with the Cincinnati Bell Connector, Gelter said. “Hopefully it will enhance the ridership but also help the shoppers to make it easier to get to the store.”

The L-Shaped site has five streetcar stops within a three blocks, making it an easy grocery-running tool for residents of The Banks and those who live near Findlay Market. But McMullen said its proximity to the streetcar wasn’t a driving force on the site’s selection.

“It’s a very handy location to Over-the-Rhine and to Downtown residents and to people working,” McMullen said. “And it’s on the streetcar. So, it's all of those things together that make the site exciting.”

A rendering of the view of the new Kroger building from Central Parkway. Provided by GBBN Architects. 

The project also represents the completion of a roughly three-year Rookwood Properties quest to convince Cincinnati’s biggest company that its surface lot near the Hamilton County Courthouse could hold a grocery store. Rookwood is a commercial real estate developer whose residential projects include Lytle Tower and the Brandywine Court apartment community in Fairfield.

Rookwood partner Fred Kanter told WCPO in August 2014 that he had retained GBBN Architects to work up design concepts for the Walnut Street lot his company has owned since 1996. He said the site could handle retail space of up to 25,000 square feet, a parking garage of up to 500 spaces and 150 to 200 apartment units.

“There would probably be room for a grocery store,” Kanter said. “We’d be happy to have them there under the right circumstances.”

Sixteen months after those remarks, Rookwood affiliate Nieman Investors Ltd purchased three additional parcels that provided an extra third of an acre and more access to Central Parkway. That purchase was important, said 3CDC's Gelter, because enabled truck access without reducing the 30,000 square feet of selling space at street level.

“The Kanters have been fantastic to work with throughout the whole process,” Gelter said. “We’ve done it all on a handshake.”