Work begins on Peppertree Plaza at Spokane I-90 ‘gateway’

City planners call it the “gateway to Spokane,” but for years the empty lot near the Interstate 90 exit at Division Street has been an eyesore.

Once veiled behind temporary murals, the piles of dirt and rubble at the northwest corner of Division and Third Avenue have gone almost untouched since 2008, when a Lutheran church at the site was demolished to make room for a proposed new motel.

The Great Recession and a series of regulatory issues foiled that plan, and the owners wanted to sell the property for several years. But construction began this week on a new project, a two-story office and retail space dubbed the Peppertree Plaza.

At a groundbreaking ceremony Thursday morning, the planned 16,000-square-foot building was hailed as an important development in downtown Spokane – the first thing drivers see upon exiting the freeway.

“This is a fantastic way to come into our great city,” Mayor David Condon said, noting the Peppertree Plaza construction coincides with recent landscaping improvements along Division between Third and Fourth avenues.

The building will have space for four or five restaurants and retail shops on the ground floor, said Rita Santillanes, who owns the property with her husband, John. Half of the top floor will house business offices for the couple’s four motels, a chain of Best Western Peppertree Inns. The other half will be offered to tenants.

“This is no small project,” said Steve Stevens, CEO of Greater Spokane Incorporated.

At least one business has secured a lease for the building. Matt Schmidt, who owns an Einstein Bros. Bagels restaurant farther north on Division Street, plans to open a second location in the Peppertree Plaza.

Schmidt said the location will be ideal for catering around the city. Plus, he expects “lots of bagel eaters” passing by on their way to work, he said.

Rita Santillanes said one other business is preparing to sign a lease, but she declined to name it. The plaza also will feature parking on the south and west sides of the building, with one entrance on Third and one on Division.

The Santillaneses teamed with Spokane’s Baker Construction & Development for the project. Brooke Baker said the cost of construction is about $2.3 million, but Rita Santillanes said permitting and other expenses brought the total cost to around $3 million.

That’s on top of roughly $3.5 million the couple have already put into developing the property, she said.

She and her husband operate Peppertrees at the Spokane Airport, Liberty Lake, Auburn and Omak.

One of the challenges of developing the site was the closure of the bank that was providing their financing, Bank of Whitman, in 2011. “It’s been a real nightmare,” she said.

But the Peppertree Plaza will be a nice change of pace, she said.

“I’d never done anything but hotels,” she said. “But this will be good. It just made sense to do (the plaza) here.”

Baker said most of the building should be completed by the end of the year. Einstein Bros. and other tenants should be able to open early next year, she said.

“The shell of the building will for sure be done by the end of the year,” she said.