Northgate Centre faces building delays

The waiting game is afoot for Northgate Centre.

"We expected to be in construction next March. Now we're probably looking at June or July," says Steve Morgan, managing partner of the 42-acre Alba Village located on the old Medco property in northwest Medford.

"Every one of the major retailers that isn't here wants to be here," Morgan says. "If you're the head of marketing or store expansion for someone like Borders, Best Buy or Bed and Bath, every day you look at 43 regions across the country and are looking for which ones will offer the best returns the quickest."

Flat retail sales and the continuing housing woes have created angst on Wall Street, which means quarterly earnings by publicly held merchandisers are drawing more scrutiny than usual.

"All of the sudden, chains that planned to open 60 stores this year are now at 30," Morgan says. "It doesn't mean anything, but it means everything. All of this has probably slowed things up six months. We're working like busy little bees on this thing and it's been terribly frustrating, but we've come too far not to keep rolling."

While he says construction costs have declined during the delay, the interest payments on bare land are multiplying. At the same time, national tenants gain leverage when the economy slows.

"When there is a softening in the market, then you want to get a better deal out of the landlord," Morgan acknowledges.

Typical leases run over five-year periods with options and inflation adjustments.

"A couple of bucks a foot over a typical five-year lease, when you're talking 50,000 square feet, is $100,000 a year," says Morgan, who is developing Northgate Centre with San Francisco investor Guy Farthing.

He says negotiations in the next few days should pave the way for an announcement of major tenants next week.

The project won't be in phases, but will start on the north and west areas near Highway 238 and Central Avenue and move toward Court Street. A general contractor has yet to be picked.

"We'd prefer to have a local contractor build it," he says. "The only problem is that the general contractor has to have a good relationship with nationwide tenants. It's a marriage for about 10 months, so the winning bidder has to have more than experience and capability, it has to have a quantifiable relationship with national tenants."

Lease stipulations call for a certain amount of occupancy before the finish of the project.

"There is a co-habitation synergy," Morgan says. "It can be overwhelming for somebody that hasn't come through this before. It's not just building for XYZ, but doing five or six 25,000- to 50,000-square-foot buildings, all to be occupied simultaneously."

Reach reporter Greg Stiles at 776-4463 or e-mail

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