In a communication to the owners of the Westlake Plaza Shopping Center, Davis Advocates for Neighborhood Groceries (DANG) strongly admonished the owners of the Westlake Shopping Center for reneging on a previous agreement which has resulted in their failure to secure the Delanos in an effort to bring a viable Grocery Store to West Davis.
As the Vanguard reported two weeks ago, DANG along with consultants for the owners had found a grocer willing to move a grocery store into the spot vacated by Food Fair in May of 2006. However, when the majority owner, Farrokh Hosseinyoun pulled his promised $250,000 in capital, the deal fell through.
“I have a center that is in dire need of a grocer and our survival rests on this deal. Davis is in urgent need of a community grocer. The economy is in turmoil and my funds are reaching their end. I have offered everything I can and I am serious when I say this. Our tenants are doing poorly and want to close down which will ultimately leave us a dark shopping center. I would be foolish to not offer DeLano’s everything I could. So you must understand that if under these circumstances I cannot offer any more than I already am (vanilla shell with space built out to their specifications and $250,000 loan), then I truly must not have anything more to able to offer.”
Based on this, it would appear that Mr. Hosseinyoun has put the $250,000 loan back on the table. The question is whether it is too late. It addition, Mr. Hosseinyoun puts the onus on DANG to come up with the remaining $500,000 that is estimated to be needed to in order to fixture and equip of the store.
Mr. Hosseinyoun continues:
“Between 1,000 members I believe that it should be easy to come up with $500,000 to invest in DeLano’s who promises to personally guarantee the loan with a rate of return. I am providing a vanilla shell and offering to pay for part of his equipment a value over $1million.”
Finally, Mr. Hosseinyoun urges DANG to put aside their differences and work to bring a grocer to town.
“We are at a point where our Delanos have almost lost complete hope. Because of this issue, I am asking you to put aside our differences and stop pointing fingers so that we can come together for a greater good.”
However at this point, DANG has lost trust in the ownership that has according to them, delivered nothing but broken promises and empty rhetoric.
DANG pointedly responds:
“DANG knows that the Delanos have already withdrawn from the Westlake project, so any further discussion or posturing regarding their coming to Westlake is pointless and totally out of our hands. We cannot undo the damage that has been done.”
They continue:
“DANG cannot “put aside our differences” because we are still not convinced that you intend (or ever intended) to bring a full service grocery store back to Westlake. Although we are baffled to see in this recent e-mail that you are finally admitting that “Davis is in urgent need of a community grocer”.”
Moreover, they argue that Mr. Hosseinyoun and his minority partner Jim Barcewski have not negotiated in good faith.
“And finally to set the record straight, outlined below are the highlights of our interaction and activities. From our perspective, and since the beginning of this issue, you and your partner (Jim Barcewski) appear not to have negotiated or dealt in good faith with the prospective grocery tenants, your current tenants, the West Davis neighborhood, or the City of Davis.”
DANG’s argument is based on the fact that the owners allowed the center to deteriorate. According to them, Mr. Hosseinyoun failed to visit the site in the first eight years of ownership. Then when Food Fair vacated the premises, the owners completely gutted the entire grocery infrastructure of the building, thereby removing any possibility of a quick and less expensive replacement.
Mr. Hosseinyoun and Mr. Barcewski (the minority owner) filled in the loading dock. They submitted and have not withdrawn a zoning appeal to the city to entirely remove any grocery requirement for Westlake Plaza. They submitted a proposal for a 3000 square foot convenience store. They failed to replace broken windows on the property which created a blighted appearance. They allegedly reneged on their offer to loan the Delano’s the $250,000 at a critical point which killed the financing negotiations with First Northern Bank.
As DANG writes:
“you constantly change terms and conditions, so no prospective tenant feels comfortable dealing with you.”
DANG reiterates the expectations they have for the property owners.
The owners purchased a commercial property knowing full well that the Westlake Plaza zoning requires a grocery component of at least 15,000 sq ft. West Davis has 13,000 residents that were under-served by the previous grocery operator. Moreover, DANG identified more than one qualified grocer that said they could be profitable in the location given a lease rate with comparable market terms.
Finally, DANG write:
“We consider that based on your extensive real estate holdings and your banking/financial associations that you could offer to either loan or guarantee a loan or line of credit for $750K to the Delanos to make the deal happen.”
DANG has expressed a willingness to recommend a reduction in the zoning to accommodate the need for the Delano’s or even other qualified grocers to take only 11,000 square feet as opposed to the current 15,000 square foot requirement. However, they are only willing to do that for a grocery tenant–not in the abstract, absent a specific vendor.
They close their communication:
“Regarding this last point . . . as a creative option, DANG had considered initiating and promoting a Neighborhood Capital Fund Drive. The fund would help prospective tenants finance the fixturing of the grocery store. This option became problematic in that it would have taken too long to raise the necessary funds to be within the Delanos optimal time frame. And DANG has informed you that once you reneged on the $250K loan to Delanos and given the constantly changing situation, it does not feel comfortable engaging in a capital raising effort at this time.
Most reasonable persons would realize that DANG has taken extraordinary action to preserve the integrity of the West Davis community and should understand that it is not DANG’s or the neighborhood’s responsibility to finance your projects.
At this point the damage has been done, and your best hope for a successful grocery and shopping center has walked away in frustration.”
The bottom line here is that when Mr. Hosseinyoun has apparently been playing some games according to DANG’s communication. Two weeks ago, it was reported that he pulled his $250,000 offer from the table. This has caused the Delanos to have second thoughts and they have lost interest. Now from his own communication it appears that the $250,000 is back on the table. But it seems to be too late, at least for the Delanos.
Given the way things have unfolded, the owners now have almost no chance with the city to get the kind of zoning changes they desire. Therefore they are liable to lose considerable money unless they figure out a way to get a grocer into this spot. In the meantime, as Mr. Hosseinyoun himself acknowledges, time is moving forward, the current vendors on that site are in deep trouble and unless an anchor comes in fast, the entire shopping center will go under. This would be devastating to West Davis and indeed all of Davis.
—David M. Greenwald reporting
This property is not in the redevelopment area, so I do not think the City is going to help with cash. They can with fees. It is DANG time for group to put up or shut up, otherwise the property could be rezoned.
I can sympathize with DANG, but in the end, they can just be a nuisance but not a decider. If they want to see anything useful happen there, they should buy the property at a deep discount and do with it as they see fit. The zoning limitations and vacancies are going to greatly lower its valuation and give the neighborhood the opportunity to profit.
The owner would have to think seriously about such a proposal as DANG is strong enough to prevent him from doing anything else with the property for a long time to come…
At this point, given what the owners have pulled, they have zero chance of getting the city to agree to rezone it. They’ve pretty much ticked off everyone.
One question I have is whether the $250,000 was ever really “off the table?” My guess is that the West Davis residents have more extensive real estate holdings than the Westlake Mall owners, so maybe they should put their money at risk in this venture they claim cannot fail!
90polk: Yes the $250,000 was off the table and it was the reason that First Northern Bank pulled out of financing and the Delanos pulled out of the deal.
“My guess is that the West Davis residents have more extensive real estate holdings than the Westlake Mall owners, so maybe they should put their money at risk in this venture they claim cannot fail!”
Let me guess, you live downtown where services and shopping options are plentiful. The general plan included a neighborhood shopping center. Why is the city talking about spending millions to change fifth street instead of helping West Davis residents get a grocery store?
The Stonegate homeowners association might have considered this, but it was deemed unnecessary since a viable deal was being formed. With this last deal collapse, I think the owners have leveraged the last shred of trust that might have existed.
David, do you know how the Council would vote on a rezone and what is the limits on the use of RDA money?
Westlake is not in the RDA zone, so there is not much the city can do with money.
I don’t know 100% sure but I don’t think there are three votes to rezone that property and I know that staff would very vehemently argue against doing so. So the council would have to overrule a staff recommendation.
All this posturing to appease a few DANG blue bloods from the Marina district of old Stonegate. I’ve queried and surveyed the nearby residents of Glen Helen village and they are all for a Dollar Tree in Westlake. That solved a very similar debacle on the other side of the tracks.
Most of the people I know in West Davis and who live around me would like a grocery store. But if what you say is true, maybe they should get involved in DANG and let them know.
Sc@@W the City Staff! Can anyone on the council have a spine when it counts and rezone this when everything else has failed so miserably? Time for someone to just do the right thing–WE didn’t elect “city staff” I am SO tired of reading about how the all-powerful city staff recommends this or that. City Staff has too much power and provides too much cover, too often.
[i]”If they want to see anything useful happen there, they should buy the property at a deep discount and do with it as they see fit.”[/i]
I don’t see anything changing at that site for a long time. Before Delano’s was brought into the picture, I was convinced no supermarket operator was interested. I concede I was wrong in my assumption. However, given the terrible state of our economy, I cannot see anyone financing this project now.
Because it appears that Delano’s was interested and it was the owners of Westlake who could not make a deal happen — I presume not out of malice but out of today’s economic reality — the Davis City Council is not going to rezone that site. The only reason to have done so was under the presumption that no supermarket would ever do business there, and that appears to be false.
If the current owners have a substantial loan on that property — which is normal in commercial real estate — I would guess it will go bankrupt at some point and their lender will have to find a new owner. Presuming the new owner is fully capitalized and the zoning will not change, it will likely have to be the new owner who gets Delano’s or someone else to move in. All of that will probably take 4-5 years, assuming our economy turns around in 2 years or less. Hopefully the rest of the mall does not become a ghost-town in the meantime.
Dear City Council Members – I am a West Davis resident and have been for over 10 years.
Please make it a PRIORITY to locate a GOOD QUALITY grocery store in West Davie at the Westlake Plaza.
It is seen as lip service to say that you want to leave less of a carbon foot print on the city and then you don’t even provide neighborhood shopping centers.
Please put actions behind what has up until now been “empty words.”
Sincerely,
A West Davis Resident / Voter / Tax Payer
P.S. Thank you for this article David Greenwald. Perhaps you should think of running for city council. You and your wife seem to do a lot for the community which is more than what we get from some who are on the council.
Olk Skool Davis: We don’t need another Dollar Store in Davis. We need a grocery store in West Davis. It’s very simple.
But at least Popeye the SAYLOR(man) can make time for “office hours” at the CoHo!! He must be exhausted from all the Pandering he has to do! Glad I never voted for him, and never will.
I want to thank David Greenwald for highlighting the contined efforts by DANG to get a grocery store at Westlake Plaza. His detailed accounts are very educational on a complex topic.
As a member of DANG we continue to focus on getting a store at that location. A grocery store of 11,000 sq ft would attract between 1,000 -1,500 customers per day. It is those customers that give life to the other local family businesses at Westlake Plaza. Converting the former 22,000 sq feet to offices will bring too few people to those other stores. If the zoning is changed we will end up with an Office Center. That is why we focus on getting a grocery store to come.
We thank all of you who support our efforts.
Rich,
What is the flow through tax stream like for a grocery store vs. a discounter? Davis needs money badly and that should be taken into consideration.
I agree that securing financing on CRE and business to business lending will be problematic in the extreme. There was a window and now it’s gone, regardless of who is at fault. I would not be surprised to see more business bankruptcies in the next two years as decades of policy come home to roost. I don’t know why people in Davis seem to think that they are immune to outside forces.
[i]”What is the flow through tax stream like for a grocery store vs. a discounter?”[/i]
The gross sales tax collected by a small discount retailer would be higher. However, if the discounter was simply selling merchandise that its Davis customers would have been buying from other extant Davis retailers — say from Long’s on West Covell, Dollar Store on E. 8th and Rite Aid on Russell — then the City of Davis would receive no increase in sales tax revenues.
I never thought about that much until this sort of argument was made about Target in East Mace Ranch. I think it is plausible that some of Target’s sales there will come at the expense of current retailers, thus bringing no fiscal benefit to the city. However, because so many folks in Davis currently shop outside of town for most of the items Target will sell, and because some out of towners who never shop now in Davis will shop at Target in Davis once it opens, I believed (and continue to believe) the analysis done by our Finance Dept., which claims Target will add net sales tax revenues of about $650,000 per year to start.
On the other hand, I am skeptical of the claims that Target will inspire a great wave of crime, causing us police costs equal to or surpassing the net sales tax revenues. From the literature I have seen on this “phenomenon,” an increase in crime from big box retail seems to only occur in high crime communities, usually when the would-be robbers had no other good stores to hold up.
“The gross sales tax collected by a small discount retailer would be higher.”
What is your basis for this statement? Grocery stores have a much higher turnover than other retailers. While a high percentage of their product is non-taxable, a significant percentage is not. Liquor stores have a really high turnover and high tax revenue. So if the grocery store sells a lot of alcohol, not to mention all the hard goods sold at the average grocery store, I’d guess your statement is incorrect, but I don’t know. Let’s hope West Davis has a lot of wine connoisseurs.
“I think it is plausible that some of Target’s sales there will come at the expense of current retailers.,..”
No kidding.
“because some out of towners who never shop now in Davis will shop at Target in Davis once it opens…”
Really? Which ones? Folks from West Sac? Woodland? Dixon (Vacaville shopping is closer to Dixon than Davis)? What nearby community doesn’t have a Target or equivalent, either right there or nearby? The I-80 corridor is massively overbuilt with big box retail.
“usually when the would-be robbers had no other good stores to hold up…”
I’m guessing the crime occurs in the parking lots, or is related to shoplifting. But I have no data on that.
Don and Rich,
Where this becomes an issue is that many residents have no desire to pay the Davis mark up that the current selection of retailers charge for items. So Davis consumers, with budgets in mind, tend to do one big shopping trip out of town, saving gas, time, and dollars. This is the trend Davis needs to make work for it and not against it. If you want those dollars back, forget trying to save downtown shopping as it’s already doomed in this economy. Instead worry about saving the larger city.
[b]”The gross sales tax collected by a small discount retailer would be higher.”[/b]
[i]What is your basis for this statement? Grocery stores have a much higher turnover than other retailers. While a high percentage of their product is non-taxable, a significant percentage is not. Liquor stores have a really high turnover and high tax revenue. So if the grocery store sells a lot of alcohol, not to mention all the hard goods sold at the average grocery store, I’d guess your statement is incorrect, but I don’t know. Let’s hope West Davis has a lot of wine connoisseurs.[/i]
Even if the gross sales tax dollars are higher at a full-service supermarket — what you say makes sense; I was thinking too much of just food vs. all taxable sales, and I didn’t even know there was sales tax on liquor* — I would guess in either case the net sales tax revenues to the City would be close to zero, because of the displacement factor (unless a merchant sold goods otherwise unavailable in Davis).
[b]”because some out of towners who never shop now in Davis will shop at Target in Davis once it opens…”[/b]
[i]Really? Which ones? [/i]
According to the anti-Big Box zealots in Davis, the reason stores like Target like to locate next to major freeways like I-80 is to catch freeway traffic. So I guess (if the zealots are right) that would be some of it. The rest would be people who are from out of town but in Davis for some other reason. I know that I have at times been out of town in need of a small gift and stopped at the nearest Target. If a person from Winters, for example, was heading to Sacramento, he might do that at the Davis Target. If it did not exist, he would go on to a store in West Sac or in the capital.
* I rarely drink alcohol.
From the Board of Equalization:
The following sales are generally subject to tax:
• All alcoholic beverages
• Carbonated water, soft drinks, and mixes
• Ice
• Tobacco products
• Certain hot prepared food products.
Of course, a lot of other items sold in grocery stores are taxable as well. There are also excise taxes on alcoholic beverages.
Based on DPD’s quotes of DANG correspondence, if I was the owner I would tell them to take a hike. They could use lessons in negotiation, humility and diplomacy. Such arrogance is typical in Davis though, so why be surprised?
You have to understand, he basically lied to them. And he needs them. Otherwise his place is going to sit vacant and he’s going to lose money and all of the current businesses are going to go under. He’s not in a position to tell them to take a hike–he has much more to lose than they do.
Actually I don’t think he did lie to him. Finacing that was available to businesses even 6 weeks ago is gone again. Especially in California. Doesn’t anyone besides Rich watch the greater finance markets?
Any business that produces correspondence with the tone and language used by DANG, would never be able to get financing for anything. Turn it around, what if the mall owner wrote a letter like that to DANG. They’d be picketing and bleeding all over this forum. Whether the owner is a good business person or not, I don’t agree with DANG’s approach at all.
You may be right, but I think again DANG got fed up with them. Seems like a lot of people are willing to excuse some pretty inexcusable things on the part of the owner.
[b]• All alcoholic beverages
• Carbonated water, soft drinks, and mixes
• Ice
• Tobacco products
• Certain hot prepared food products. [/b]
Thanks, Don. All products I don’t normally buy. … This is going to sound quite stupid, but the last time I bought alcohol — a 6-pack of beer we brought to a Super Bowl party — I didn’t pay any attention to the receipt, which would identify there being tax. I realized that the amount charged would be higher than the list price. I just (dumbly) assumed that all of that difference was in the recycling fee. (I almost never buy any bottled products which charge the fee, so I didn’t know how much that was. Speaking of which… It is odd to me that sometimes fruit juices will have that fee added, and sometimes they don’t. I wonder what the determinant factor is?)
I honestly don’t see a grocery store being successful long term in that space. A smaller grocer just can’t compete with the sales, BOGOs and two-fers that Safeway provides. And really – how inconvenient can it be to drive a mile or so down Covell to go to Safeway? Aren’t most of us driving to Woodland to go to Costco and Target and West Sacramento to go to the Wal-Mart Superstore and IKEA anyway?
One of the strengths of the Delanos is that they have made this style of store successful. In part because they offer specialities. In part because they know the business and how to make it work.
To throw out a scenario, would a Trader Joe’s work there? I think most people would say yes, although they may argue that it might be more successful elsewhere.
Why would Trader Joe’s work? Because it provides a product you do not get elsewhere and serves a niche.
The idea behind a grocery store then would be to one the one hand serve the kind of niche needed to give it a competitive advantage while at the same time serve the everyday needs of residents.
One of the things that works for a smaller store is to be able to supply quickly certain products that people could quickly and efficiently purchase on the way home from work that maybe do not require a full visit to a larger store or a place like Costco or Target.
The bottom line is if you have people running the operation who know what they are doing they can make a store work. What did not work was poorly run stores and poorly maintained stores of the past. I think and believe that a store could work there.
As a DANG member, who has had to try to deal with this disingenuous Slimedog Millionaire on this issue for nearly 3 years, I would say this to those who condemn DANG’s current “arrogant” approach: We tried being nice for over 2 years, negotiating with humility and diplomacy and got nothing but deceit and manipulation in return. To you casual observers who haven’t been engaged in the issue and who do not know all the sorted details involved, it is easy sitting out of range and lobbing your criticism . . . you ought to have walked in our shoes. And I know somebody out there is going to say I shouldn’t be name calling . . . but this shoe fits and he is wearing it. The guy did not spend a dime on or even visit Westlake for the first 8 years he owned the property, it was his cash cow. His “property manager” said in a public meeting that he thought he needed a permit from the City to change burned out parking lot light bulbs, and that is why it was dark . . . give me a break!
David your description of Delano’s business model is accurate. They are experienced with over 80 years in the grocery business between father and son, and they know that they can be profitable at Westlake. I visited several of their stores and found that they manage to have all the features/elements of the mega groceries, and their 9500 sqft Castro and 12500 sqft Geary store look like a small Nugget. They have been successful in San Francisco and Marin county locations where other groceries have failed, because they know how to tailor their stores to fit the special needs of the specific neighborhood, their professional staff knows their customer’s by name, and they themselves put a personal face on the business . . . everyone knows “Mr D”.
I hope we can still help facilitate a deal between the Delanos and the Westlake owners!
I heard that the owner of Westlake owns a bunch of other properties, and just considers this one his loss leader, so is willing to sit on it indefinitely. Anybody know if this is true?
The Westlake partners appear in the public record to have a large number (exceeding 20) of real estate and business interests in Marin, Alameda, Solano, Sacramento, and Yolo counties. Until March/April ’08 the Westlake property was probably a positive cash flow because they bought it in a distress sale around 1999 . . . but then their largest tenant (West Yost) moved to their own building (better rent factor), vacating at least 17,000 sq ft of office space and taking their many employees with them. These employees supported the restaurants in the center.
At this point they may be taking a loss on this property but using the write off against any gains they had elsewhere.
However, even though they are now claiming a hardship, they never have acted very motivated to retain tenants nor have they made a credible effort to recruit or negotiate with a reputable grocer to anchor the Westlake center.