Controlboard says no liquor store downtown

Published on Thu, Jul 26, 2007 by ack Kintner

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Control board says no liquor store downtown

By Jack Kintner

The Washington State Liquor Control Board has told the woman they picked to operate a contract liquor store in Blaine that she must either open her contract liquor store in the International Mall on H Street or lose the contract, despite thousands of dollars in unanticipated costs added by mall owners after she was chosen.

Nicole Perry, owner of the Custer Country Store, was notified last May 10 that she was the top choice among six finalists to operate a contract liquor store intended to replace the state-owned store that the liquor board closed last June 2.

Two weeks later the mall sold to Cincinnati-based Phillips Edison, “and all of a sudden there were all these extra charges. I can’t afford to operate out there now and still make a living,” Perry said.

The liquor board has given her a deadline of August 6 by which she’ll have to either sign a lease to operate in the mall or forfeit the contract, in which case it will go to the applicant who was runner-up.

The liquor board has refused to allow Perry to change to a less expensive location, saying that the mall is the only place that makes sense. “That’s the location in the business plan she submitted with her application, and we’re holding her to it,” said Dave Wilson, regional manager for the liquor board and part of the interview committee that chose Perry.

“The liquor board is looking out for the best interests of the citizens of Blaine and to maximize our revenue,” said Wilson, “so it’s senseless to locate a store in a less desirable area such as downtown Blaine, where the citizens of Blaine would not be served as well. They’re used to the mall location, and by staying there we’re providing best possible service for Blaine and the best profitability for both the liquor board and the contractee.”

“The extra money this will cost me is enough to hire another person, at least part-time,” said Perry, “so I can’t understand how that benefits Blaine, to be sending all this money to Ohio instead of hiring someone locally.”

Phillips Edison is represented locally by Vasili Lyhnakis who works out of Salt Lake City. Lyhnakis referred questions to Mark Addy of corporate headquarters, but several calls to him went unreturned.

The liquor board did allow Perry to change her location at the time she applied. Her first choice was to locate in her current business, the Custer Country Store. “But I was told that the store had to be in Blaine,” said Perry, “and Dave Wilson allowed me to change that on my application before handing it in. He suggested opening in the same place as the old one, in the mall, but also to be ready to look for another location if that didn’t work out. So I said sure and put the mall on my application.”

When the mall sold, Phillips Edison raised the rent over 30 percent above figures Perry said she was quoted by the previous owners. Phillips Edison also added a $5,000 security deposit, required her to refurbish the space at her own expense and increased the lease from five to 10 years, according to paperwork Perry has.

“No, she’s wrong, the rent went down for her, not up,” said Brian Smith, who handles media relations for the liquor board. “We were paying $11.58 per square foot and she’s paying only $10.75,” he said, adding that, “I think she’s pulling your leg.”

Phillips Edison’s latest offer to Perry in writing, sent on June 22, offered to rent her mall space number 825 at $10.25 per square foot per year, plus “additional rent” of $2.25 per square foot to cover various fees, for an actual figure of $12.50 per square foot, or $19,775 in annual rent, roughly $3,600 more than the figure she said was quoted to her by the mall’s previous owners. A $5,002.11 security deposit added by Philips Edison brought Perry’s first year costs to $24,777.11 in rent plus her out-of-pocket expenses to renovate the space.

“Who does that,” she asked, “rents you a store or a house and then charges you to clean it up and get it ready?”

Perry said that she had two contractors make bids on the work, one of who is her brother, and got bids of a little over $28,000. “I asked my brother because he’s available, and he’d be willing to wait until the work was done before getting paid. Not many contractors will do that,” Perry said. A second contractor agreed that the bid was reasonable.

Phillips Edison modified their original offer in agreeing to a seven year lease instead of 10 years and agreed to reimburse Perry slightly under $20,000 in renovation costs once she was up and running and had satisfied several conditions. That figure is similar to one Wilson arrived at “when I looked at the space and estimated what it would take to fix it up,” he said.

At Wilson’s earlier suggestion, Perry said, she found a somewhat smaller but suitable space in downtown Blaine that’s ready to go for $9.09 per square foot the first year, one month’s rent ($1,000) security deposit, the first two month’s rent waived as an incentive and no other fees for a first-year cost of $11,000, or nearly $18,000 less than her costs would be at the International Mall after their promised reimbursement for renovating the space.

She had earlier investigated Birch Bay Square Mall, where developer Adam Ware offered her 2,500 square feet at $1,200 per month for the first year, or $5.76 per square foot per year.

Smith defended the liquor board’s refusal to allow a location change, saying that “[liquor board retail manager] John Redal and Blaine city manager Gary Tomsic have had a close working relationship, and Tomsic agrees with our preference for the mall.”

Tomsic responded by saying that he’s “not been in conversation at all with Redal except for the letter he sent to us notifying us of their plan to close the state-owned store and my reply.” Tomsic added that while he thinks “either the mall or downtown would be fine as locations,” he also submitted a letter to the liquor board in support of locating a contract store at Bill Becht’s Horseshoe Building at Martin Street and Peace Portal Drive on behalf of another applicant.

When asked why the liquor board still favored the mall location even with the dramatic difference in costs, Smith cited a letter to Perry from the liquor board stating that the International Mall, in their opinion, is the “retail hub of Blaine and shows the most promise for future growth.”

Wilson said that he developed this opinion after spending a week in a condo in Birch Bay and visiting Blaine watching traffic patterns and “asking around.”

But Wilson said he knew nothing of continuing efforts to attract businesses to downtown Blaine, had not read the comprehensive plan nor had he talked to anyone in the Blaine Chamber of Commerce, the Blaine Community Development department or the Blaine city council. Tomsic was the only one he could name as someone he had specifically asked about locating a store at the mall as opposed to downtown.

Both Smith and Wilson admitted that getting so specific with the site selection process wasn’t necessarily liquor board policy. “It’s been our practice,” Smith said, “and here we feel strongly that the International Mall is the best place, as do many others who know the area well.”
But when asked to name anyone locally who agreed, neither Smith nor Wilson could name anyone save former Blaine liquor store employees they declined to name.

Former International Mall tenant and 10-year Blaine businessman Bob Christianson, owner of Pacific Building Center, said “What’s the state’s interest anyway? They should either be in or out, either run the store themselves or let someone else do it in the way they see fit and get out of the way.”

Perry says that if she goes ahead with the store in the mall that it won’t open until late September or early October, while her chosen downtown location could open “in a week or two.”

The International Mall opened in 1991. A few years later Blaine’s state-owned liquor store moved there from its previous location for many years, a downtown building on H Street west of the freeway that has since been torn down.

State law limits the total number of state-owned stores, so in order to open a new store near Wal-Mart in Bellingham the Blaine store was closed, said Wilson.

“That’s not very common, because usually a contract opens up because someone retires. But in this case the new store in Bellingham started doing nearly twice the business it did in Blaine from the first day,” he said.