West Oakland supermarket on hold as owners fight in court
A dispute between the owners of a West Oakland shopping center has derailed plans for the district's first supermarket in nearly a decade, leaving a prominent Oakland businessman facing a possible $500,000 fine and his third lawsuit in the past year.
Hopes were high for the long-struggling Jack London Gateway shopping center last year when Thomas Henderson bought a majority stake in the property with the promise of renovating it and operating a high-end grocery store as the anchor tenant.
But the storefront at 800 Market St. remains an empty shell, as it has since 2007. And, the nonprofit West Oakland Marketplace Advancement Company, which brought Henderson aboard as its partner, has filed a lawsuit against him charging that he has not made required payments on the $3.7 million he owes in connection with buying the property.
"That's just horrible," Councilwoman Lynette Gibson McElhaney, who represents West Oakland, said when informed about the lawsuit. "I was concerned about how slow that appeared to be going."
Henderson, who is already fending off lawsuits from partners in two other business ventures, said in an email that he had made the required payments and was working on permits for the store. He blamed the nonprofit, known as WOMAC, for the current quagmire.
"Their only interest is to stop the project for their own personal gain to the demise of the West Oakland community," he wrote. "A food desert with 65 liquor stores and no grocery store/pharmacies. What a shame."
WOMAC's attorney Stephen Preonas responded that the nonprofit remains committed to developing a supermarket at the site and that the lawsuit is "an unfortunate and necessary means to this end due to the failure of its development partner ... to fulfill its agreed-upon financial commitment, despite demands that it do so."
The dispute is just the latest saga for the 32-year-old shopping center, which has twice fallen into the city's hands after private owners failed to turn a profit.
The most recent ownership group, which included WOMAC, the East Bay Asian Local Development Corporation and Portfolio Property Investors, nearly landed the British retailer Fresh & Easy in 2008, but never succeeded in luring a supermarket.
West Oakland's relatively small population of about 25,000 residents has been a major obstacle, said Patrick Lane, the city's development manager. Another obstacle, according to local business leaders, is that the center is surrounded by permanently affordable housing developments, whose residents lack the purchasing power sought by the major chains.
But none of that appeared to faze Henderson, who had said his supermarket would have French doors, wood floors and an in-house nutritionist.
The 66-year-old Oakland resident has made a name for himself recently by utilizing a federal program, known as EB-5, in which wealthy foreigners, primarily from China, pay $500,000 to bankroll projects that create domestic jobs in exchange for permanent residency in the U.S.
Henderson, through his company, the San Francisco Regional Center, has used EB-5 money to help buy several downtown office buildings, including the Tribune Tower, where he operates a call center that he says employees 240 people.
Confident that Chinese investors would fund the supermarket, Henderson secured a $6.9 million loan to help buy out WOMAC's two partners and obtain a 75 percent stake in the shopping center. He also agreed to assume the $387,996 debt the prior owners owed the city.
As part of the transaction, Henderson signed an agreement with the city allowing it to seek $500,000 in damages if he failed to have the market open by the end of this year -- a timetable McElhaney said Henderson still needs to meet.
"I'm very much interested in him fulfilling his promise to the West Oakland community to bring a high-quality grocery store to that location, and I expect him to do it in the time period that he promised," she said.
Henderson, however, wrote that he will seek a waiver from the city and that he had stopped trying to raise EB-5 money for the project after the lawsuit was filed. He wouldn't say if he had lined up any investors.
WOMAC's lawsuit, filed last month, accuses Henderson of gaining a controlling stake in the shopping center by falsely claiming that he intended to rehabilitate the property, and that he would pay $3.7 million, which the nonprofit planned spend on community service projects and improvements to the center, which includes other businesses.
Henderson is also being sued by Allan Young, his partner in CallSocket, the call center company. Young alleges that Henderson diverted funds from their business to help amass his real estate holdings and is asking a judge to compel Henderson to provide him with company financial statements. Last year, Oakland restaurateur Chris Pastena sued Henderson alleging that he had violated their agreement to operate two restaurants: the Tribune Tavern and Lungomare. They've since reached a tentative settlement that divided the restaurants between them.
Henderson insists all three legal actions were frivolous. "Lawsuits come with the territory," he wrote. "That's business. That's why there are attorneys."
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