High-end Villages struggling

Two new high-end shopping centers in upscale Santa Rosa neighborhoods are struggling to lure new tenants amid a slowing economy that's causing shoppers to spend less and making businesses reluctant to expand.

Troubled Skyhawk Village in Rincon Valley, a mixed-use project anchored by a gourmet grocery, was put up for sale last week.

The $10.5 million listing, confirmed Friday by owner Mike Runyan, follows a year of disappointing sales at his Skyhawk Market. Many of the other retail shops and apartments remain vacant at the high-profile project, which sits on busy Highway 12 at the entrance to the 515-home Skyhawk subdivision.

Financial problems at Skyhawk Village have spilled over into a similar mixed-use neighborhood development several miles west. Fountaingrove Village, which sprouted up in the tony hillside neighborhood last year, remains largely vacant.

The delays have Fountaingrove residents wondering when they'll finally have a convenient commercial center of their own.

"I get calls weekly from neighbors saying 'When is the market going to open?' " said Dave Peterson, an agent with commercial real estate firm Keegan & Coppin.

Runyan, former owner of three Food4Less grocery stores and a former Santa Rosa city councilman, had planned to open a second grocery at Fountaingrove Village by May 2007.

Now, Runyan says he has been forced to shelve that project until business picks up at struggling Skyhawk Village.

"We know that Skyhawk has to be stabilized before we can spend the kind of money it will take to open another site," Runyan said.

Runyan said he signed a 10-year lease for the Fountaingrove location more than a year ago. Today, instead of flower baskets, a "For Lease" banner and plywood cover the entrance to the 9,000-square-foot market building.

The setback has forced developer Clem Carinalli, whose Carco Investments built Fountaingrove Village, to launch a search for a new anchor tenant.

"It's been difficult because the size of the market space is between markets -- a little too small for a Whole Foods and a little too big for some of the smaller operators," Peterson said.

Absent an anchor, attracting new tenants to Fountaingrove has been a challenge. A hair salon, dry cleaner and investment firm are the only three businesses open in the complex.

Several others, however, have either signed leases or letters of intent to occupy the spaces, said Kim Smith, a project coordinator with Carco. These include a flower shop, café, women's clothing store, coffee shop and real estate office, Smith said. She declined to name any of the potential tenants.

Carco is in final lease negotiations with a grocer to replace Runyan's lease, Smith said, declining to name that party. Carinalli did not return calls seeking comment.

Runyan said he informed Carinalli last spring that construction on Skyhawk Village was taking longer than he expected, making him unable to immediately "consummate" the lease he signed for the Fountaingrove grocery.

"Last year was very challenging," Runyan said. "We didn't finish construction of the shopping center until June or July, and then a month or two later, the whole subprime thing hit."

The subprime loan debacle has caused banks to tighten their lending requirements, making it difficult for Runyan to refinance his Skyhawk project, he said. Sagging revenues haven't helped.

Al Coppin, co-owner of the brokerage marketing both properties, said he suspects Runyan may have overestimated the demand for a full-service gourmet grocery in the neighborhood, which has a Safeway less than a half-mile away.

"It's a market misfire," Coppin said.

But hopes remain high up on the hill.

Dave O'Rourke, head of Bell Investment Advisors, says clients have raved about the company's new offices in Fountaingrove Village.

"I realize that we are among the first to move in here, but it's our vision that this is going to be a very vibrant spot," O'Rourke said.

Peterson agreed the setbacks at Fountaingrove Village are likely to be short-term ones quickly forgotten once new tenants move in.

"It's a phenomenal location. It's a phenomenal design. It's going to be successful, it's just taking some time," he said.

You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.mccallum@pressdemocrat.com.