COMMERCIAL MARKET - BIG UPS AND BIG DOWNS.

Byline: PAUL WEIDEMAN

By Paul Weideman

American Eagle Airlines figures prominently in the past year's news. As of June 11, the carrier has offered daily flights between the Santa Fe Municipal Airport and Dallas-Fort Worth International Airport. The commercial airline said it would add daily flights between Santa Fe and Los Angeles International Airport beginning on Nov. 19, 2009. That rather remarkable development, initiated during a wounded financial climate, comes on the heels of another groundbreaker: the building of a new railroad and last December's start of New Mexico Rail Runner Express service between Santa Fe and Belen. The third local stop, near the intersection of I-25 and N.M. 599, opened this summer.

On this end of the line, the trains pull in to a profoundly redeveloped Santa Fe Railyard. Its big star is the new home of the Santa Fe Farmers Market. The largest new building in the Railyard is the 85,000-square-foot Market Station. REI, its anchor tenant, opened in September 2008. During the past year, it was joined by a Flying Star Cafa, a clothing/jewelry/accessories shop called Daniella, and GoWireless, a Verizon dealer. Apparently still on hold are the developers' other hopefuls of a year ago: Bin 132 Wine Bar, Ringside Bowl Cafa, an Apple store, and the 13-screen Maya Cinema movieplex.

Among the other area restaurant openings, besides the Flying Star, are Atrisco Cafa and Bar in the former Diego's space at DeVargas Center; Milagro 139 in the San Francisco Street location formerly occupied by Tribes Coffeehouse; Corazn, a restaurant/lounge that opened last spring at the corner of Guadalupe and Montezuma streets; Restaurant Martn, a startup by chef Martn Rios in a new building at the site of the former Cafa Oasis, 526 Galisteo Street; and, south of town, Real Food Nation at the intersection of N.M. 285 and Old Las Vegas Highway and Pizza Centro at the Agora in Eldorado.

New lights in the espresso/coffee universe include Brasserie Zuniga, which opened in early September at 228 Old Santa Fe Trail, the location formerly occupied by Latitudes Espresso and Ice Cream. The new business, which offers breakfast burritos and milkshakes, as well as espresso drinks and coffee, is owned by Enrique Guerrero and Fritz Holland. PD Bean is gone; now at 2411 Cerrillos Road is Cafa Ola, offering food, coffee and espresso drinks, and a WiFi environment. There's free WiFi, and organic coffee, sandwiches, wraps and pastries at Bean and Gone, which opened last spring at 3354 Cerrillos Road.

Connor Hall, one of four New Mexico School for the Deaf (founded 1887) buildings that are on the National Register of Historic Places, is undergoing a major reconstruction. Basically, the main building is being updated with a steel-framed structure, while the facade -- the old building is concrete beam with masonry (pentile and red brick) infill -- is being preserved. Tom Winkel, job superintendent with Brycon Construction, said they're shooting for a LEED (Leadership in Energy & Environmental Design) "Silver" certification on the project. Hoped-for completion is March 2010.

The city of Santa Fe will pay the New Mexico Finance Authority more than $2 million annually for the next 27 years to keep intact the 150-year-old College of Santa Fe. The Santa Fe City Council voted to buy the financially insecure institution and its campus of 61 acres this past summer. The college (often called an "art school," although it also offers programs in education and business) is a member of Laureate International Universities, a Baltimore-headquartered network of 45 schools on four continents.

The remodel and expansion of Carlos Gilbert Elementary School, which is over 60 years old, is ongoing. Of the total building area of 44,000 square feet, Enterprise Builders is adding about 10,000 square feet. Architect Claudio Vigil is keeping the historical look of the 1940s, so the new construction features plastered walls, and beams and crown moldings -- "lots of incredible woodwork" by OGB Architectural Millwork, Albuquerque, according to Enterprise project manager Anton Johansen. The project began in April and should be complete by year's end.

Another new LEED-certified building is the recently completed state office of the Bureau of Land Management/Public Lands Information Center at 301 Dinosaur Trail. The staffs were scheduled to occupy it during the third week of October, leaving their previous office at 1474 Rodeo Road. That space was shared with the Santa Fe National Forest Supervisor's Office, which, in September, moved into their own new building at 11 Forest Lane near the intersection of N.M. 14 and N.M. 599.

Dan Lyons with Bradbury Stamm Construction, Albuquerque, said they hope to resume construction on the First Judicial District Courthouse in downtown Santa Fe at the beginning of March. Meanwhile, the New Mexico Environment Department and Santa Fe County are working together to finalize a plan for onsite and offsite remediation of petroleum-contaminated soil from a former use.

Peter Komis, who has approvals in place for a mixed-use development on 58 acres near I-25 and N.M. 599, wishes the courthouse developers would have come to his neck of the woods. "I'd like to see a 'Santa Fe uptown' out here -- Barbara Pearson has 25 acres adjacent to mine and she also has her approvals -- and I think the courthouse would have been perfect here. They've absolutely destroyed the downtown with that thing and my parcel is just 15 minutes from downtown.

"The new overpass and Rail Runner stop right next to my property was supposed to cost $2 million, I think, and it went to $8 million," Komis said. "They need to put it to good use."

New businesses during the past year at San Isidro Plaza near Lowe's and the new movie theater on Zafarano Drive include Postal Connections, Santa Fe Capitol Grill, Burger King, HoHo's Asian Bistro, and Plaza Cafa. In the near future, Que Bonita, a cosmetics store, will take the space previously occupied by Kate Brennan Shoes & Such. And the city's second Sunflower Farmers Market is expected to open on Jan. 1. The market chain (the Sunflower motto is "Serious food... silly prices") started up in 2002 and now has 27 stores in six Southwestern states. The San Isidro Village store will be the first of four more the Boulder, Colo.-based retailer plans to add in 2010.

The other Sunflower market opened in August at DeVargas Center, and less than two months later had to lay off a quarter of its workforce because sales didn't meet expectations. The DeVargas remodel of the former Albertsons space also created 10,000 square feet on the east end of Sunflower. Only 3,000 is still open with the mall's additions of Mattress Firm and Four Seasons Sunrooms and Windows.

Changes inside DeVargas Center include Christine's Bridal & Formal Wear relocating into a larger space across from Las Cosas Kitchen Shoppe, and the Outdoorsman business expanding into the former Christine's space. Also coming is Indigo Baby, an "organic and natural infant and children's boutique."

The commercial market is "definitely still tight," said Katy Fitzgerald, DeVargas Center manager with mall owner Weingarten Realty, Houston. "Even though they're saying things are turning around in the economy, I don't think the retailers are seeing it yet."

Beth Riebschlager, Santa Fe Place general manager for Chicago-based Jones Lang LaSalle, reported "no major changes in the last year. We're just keeping our doors open, and there is nothing coming that I can announce." The former Villa Linda Mall lost one of its anchors, Mervyn's (over 62,000 square feet) and another large retailer, Shoe Pavilion (more than 15,700 square feet) last year. Those spaces remain unleased.

In the car world, Santa Fe has not been immune to national difficulties. One local example is the former Mitsubishi dealership at 1955 St. Michael's Drive, now for sale for $2.15 million. On the positive side, a new Lexus automobile dealership recently opened its doors at 6824 Cerrillos Road. And work is commencing at the site of a new location for Beaver Toyota out Cerrillos Road by the bypass. "We're just doing earth work now, but this will be 62,000 square feet for their service center and showroom," said Ralph Stumpff of John G. Rehders General Contractor." We're hoping for a fall 2010 completion."

Back in town, the store at the southwest corner of Cerrillos Road and Baca Street, which has housed a succession of sleep-center businesses since the 1980s, is continuing the trend. The newest is Futons & Frames and it's a Santa Fe location for the 23-year-old Albuquerque business of the same name.

Local banks seem to be doing alright. In the early spring, Del Norte Credit Union plans to move out of leased space in Pojoaque. Chuck Valenti, president and CEO, said their operations division will go into a new building in Espa[+ or -]ola and their administrative personnel will relocate into an 11,000-square-foot addition now being built next to the credit union's new (2005) branch at 3286 Cerrillos Road.

First National Bank of Santa Fe opened a new Southside Office at Cerrillos Road and Governor Miles Road; Los Alamos National Bank opened a new branch at Cerrillos Road and Vegas Verdes; and New Mexico Bank & Trust plans to open a new, 10,000-square-foot branch on St. Michael's Drive, near the entrance to the College of Santa Fe, in January.

A mixed-use proposal for the 5.5-acre Archdiocese of Santa Fe property southeast of the Cathedral Basilica of St. Francis of Assisi is stalled. The plans for Hunt Development Group's "Paseo de Santa Fe" development involves over 132,000 square feet of retail uses and restaurants, 112,000 square feet of condominiums and lofts, and three levels of underground parking. Questioned about the reason for the holdoff, company spokesman Jim Dobbie said, "It's the national economy. We aren't even pursuing anything with the city of Santa Fe right now."

Next door, Drury Hotels may begin work as soon as next fall on its plans: the renovation and expansion of the 1954 St. Vincent Hospital building as a Drury Plaza Hotel with 175 rooms; the adaptive re-use of the 1910 Marian Hall as a boutique hotel with 30 rooms; and the construction of an underground parking facility and of 65 casita suites in today's parking lot south of Marian Hall.

"As of last week we survived the appeal period," Drury project manager Brian Nenninger said on Oct. 19. "The historic board and the city are all behind the project. Now we can start all the detailed architectural, engineering, structural, mechanical, electrical, and plumbing planning."

Nenninger said the national recession has had no direct impact on the company's Santa Fe plan, but he added that Drury Hotels "will be re-evaluating this thing, probably on a bimonthly basis. The kind of discussion we'll be having is that we may possibly be concentrating first on Marian Hall and do the hospital in a second phase, rather than the other way around, because the initial expenditure would be less. That's what the economy has sort of done to us. We'd still like do both those projects concurrently, but I doubt if that's going to be in the cards."

The most important recent news on the office front was the departure early in 2009 of hundreds of Thornburg Investment Management and Thornburg Mortgage employees from three downtown buildings: Marcy Plaza, First Interstate Building, and the old Jones Law Firm building on Lincoln Avenue. That opened up 57,000 square feet. "We have been doing some leasing," said David Oberstein of Oberstein Properties. "We've got some interest in some of the space. We have people looking."

"May Day!" would have been the appropriate cry at Thornburg Mortgage when the Santa Fe company registered for bankruptcy protection on May 1. The filing with U.S. Bankruptcy Court in Maryland reported debts of $24.7 billion and assets of $24.4 billion. The employees of Thornburg Investment Management, a separate company, are enjoying their new quarters, a 102,000-square-foot office building designed by Legorreta + Legorreta of Mexico City, which was recently awarded the LEED "Gold" certification.

"Thornburg Investment Management is doing very well and is at the point of looking at expansion," said David Miller, a managing director and senior vice president of Thornburg corporate communications. "Our economic results, our performance results, are just about all beating their benchmarks and all of our strategies and funds -- equities particularly -- are in the top 25 percent and some are in the top 10 or 5 percent. So aside from the sad news about Thornburg Mortgage, things are pretty good."

At the Santa Fe office of Grubb & Ellis, broker Leon Mellow said, "In the last 90 days our leasing activity has picked up nicely. It was very soft before that, since the first of the year, and we've gotten some new listings."

One is Santa Fe Steamer, for sale for $995,000.

"I think the main thing is that business is just a whole lot more difficult," Mellow said. "There are more vacancies downtown than there ever have been. I was walking down San Francisco Street and in between Old Santa Fe Trail and Haagen Dazs there are three vacancies on the Plaza, which is unheard of. It is a most unusual time, and then the lending situation continues to be an issue. There are people who want to do things, but the qualifications for getting a loan are prohibiting people who even a year ago could get a loan easily from getting one. Or they can probably can, but instead of putting in 20 percent or 25 percent, now it's 30 or 35 percent, so you lose the beneift of the leverage and also for people who want to buy a property and run their own business out of it, it ties up so much of their capital, it just defeats the purpose.

"But with all that said, there is activity. We just did a lease for a dental clinic down on Cerrillos Road and we did a lease for an exercise studio on San Mateo. It's just that the sales end is not as active as it was."

The former Mitsubishi dealership on St. Michael's Drive could be a real challenge: the large, automobile-oriented listing could be a hard sell at a time when most carmakers are closing plants and dealerships.

"In normal times, it's a wonderful redevelopment opportunity. It would be a great multiple-tenant building," Mellow responded. "But now if somebody buys it for that, when they go to the bank, the bank is going to want a tenant in it before they do a loan. In Santa Fe it's very difficult to prelease things, in the best of times. In most cases, you're not preleasing the national tenants who are used to that very long lead time to build or remodel something. The tenants here want to move in next month."

Mellow's prediction for the near future isn't overly bright.

"I think 2010 is going to be very much like 2009," he said. "On a national scale, which is not necessarily anything to do with Santa Fe, there are enormous amounts of commercial loans on properties that are coming due, and the valuation of those properties has dropped so much that they may not be able to be refinanced in an amount that's going to cover the debt service. It's very scary. It's in the hundreds of billions of dollars and what will happen is that that will sweep through the economy... We don't have much of that going on in Santa Fe, but I'm concerned that the banks will be under new pressure from the regulators because of that, and it will make it harder still for everyone."

He returned to the spectacle of shuttered stores on the Plaza -- and the town seemed to be as full of tourists this year as ever. "Yeah, but maybe those tourists came here with enough money for a hotel room and food but they were making only minor purchases," he said. "Some of the stores on San Francisco Street actually went out of business in the summertime, and that's never happened," he said.

It's a recession, but big stuff is happening - like bigger than ever, with the New Mexico Rail Runner and local flights to Dallas and LA and most local banks building new branches. Some other really big projects are the $35 million, 96,000-square-foot New Mexico History Museum, which opened in May; the new $13 million State Capitol Parking Facility that opened last month; and the state museum's new Center for New Mexico Archaeology now under construction on Caja del Rio.

Finally, there's the amazing and very substantial ($216 million) Buckman Direct Diversion Project now being constructed northwest of the city of Santa Fe. Its many parts include a water-diversion structure on the Rio Grande, a raw-water lift station, a sand-removal facility, 11 miles of raw-water pipelines, two booster stations to pump the water up more than a thousand vertical feet, a water-treatment plant, two pump facilities, and 15 miles of pipelines to transport clean water to city and county water-users. Rick Carpenter, project manager, said the city is aiming for a complete, operational system by spring 2011.