Whole Foods, Interbay developer settle lease disagreement

Whole Foods plans to open its Interbay store later this year, now that it has settled a legal dispute with developer TRF Pacific.

The store, in the valley between Magnolia and Queen Anne hills, will be the area's fifth Whole Foods Market. A sixth is expected to open next year in West Seattle.

Under a new lease agreement, Whole Foods will remain the shopping center's anchor tenant with a 38,000-square-foot store. The upscale grocery chain must find a sublessor for an adjacent area of roughly 20,000 square feet it had requested but no longer wants.

Peet's Coffee, Subway, Verizon Wireless and a dry cleaner will occupy a second building in the complex.

"We've been reading about layoffs every day, so this is a good sign for a business operating in our neighborhood," said King County Councilmember Larry Phillips, D-Magnolia.

TRF sued Whole Foods in September for breach of contract and damages of $67.9 million, alleging the chain terminated its lease a week before TRF was scheduled to turn over the building shell.

The lawsuit came a month after Whole Foods' corporate office in Austin, Texas, said it was scaling back new-store openings.

Whole Foods told TRF that sales projections required shrinking the store from 60,000 square feet to about 40,000, according to the lawsuit. The chain also said cash-flow problems would delay its opening from December 2008 to October or November 2009.

TRF plans to file court papers today dismissing the suit, said Doug Exworthy, managing member of TRF, which built Seattle's first Whole Foods Market at Roosevelt Square a decade ago.

"We were never not friends," Exworthy said.

Although it was "disconcerting" to learn too late that Whole Foods wanted a smaller building, he said, the parties worked out a new lease. After the long delay, Whole Foods is eager to start construction inside its store, which could take six to eight months to complete, said Northwest regional president John Clougher.

J.R. Abbott Construction will be general contractor for work inside the shell, which for now is a vast expanse of concrete and beams.

Whole Foods plans to hire 150 to 175 people for the store, including up to 50 workers in the kitchens alone, which will offer baked goods made from scratch, custom-made sandwiches, a burrito bar and a rotisserie area double the usual size, Clougher said.

Although the store will be slightly smaller than Seattle's other Whole Foods Markets, it will be larger than the average Whole Foods nationally, he said.

Exworthy said TRF will help Whole Foods find a tenant for the additional space. He and Clougher declined to name possible tenants but said the space is attractive partly because it is on busy 15th Avenue West, where 43,000 cars pass daily.

Another attraction is being near Whole Foods, now that it is sticking around.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com