Friday, May 28, 2010

First Phase of Fresh & Easy Neighborhood Market-Anchored Condo Development in San Francisco's Bayview Set For Completion in June

Northern California Special Report: San Francisco

News & Analysis

Emeryville, California-based Holliday Development is set to complete the first two buildings of its $75 million, 340 unit mixed-use residential condominium development at 5800 Third Street (at Carroll Avenue) in San Francisco's Bayview district by the end of June, according to the developer.

The development (pictured at the top) includes a Fresh & Easy Neighborhood Market store as the retail anchor, in a 15,000 square-foot space at the bottom-level of the multi-story condo development, which is on the site of a former Coca-Cola bottling plant that was closed decades ago. The space for the Fresh & Easy store is set to be completed, along with the first two residential buildings, by the end of June.

Tesco owns the 15,000 square-foot space in the 5800 Third Street condo development, which is a project of the Goldman Sachs Urban Investment Group. The Goldman Sachs Urban Investment Group is part of the Merchant Banking Division within The Goldman Sachs Group Inc. According to the developer, Tesco's Fresh & Easy still holds the space and still plans to open a store in the development.

The 5800 Third Street project has encountered numerous hiccups since December 2007, including a construction stoppage in the summer of 2008 and the replacement by Goldman Sachs after that of the original developer, Houston, Texas-based Noteware Development, with Bay Area-based Holliday Development. And of course there's the global financial and credit crisis which started in late 2008 and has heavily impacted Goldman Sachs.

Holliday Development has an additional 5,685 square-feet of retail space for lease in the development. Most or all of that space will likely be taken by a restaurant operator, according to our commercial real estate sources.

The Third Street & Carrol Avenue condominium project was kicked off with a big bang on December 13, 2007, featuring a ground-breaking ceremony and press conference attended by San Francisco Mayor Gavin Newsom, Goldman Sachs executives, Tesco Fresh & Easy Neighborhood Market CEO Tim Mason and other dignitaries. Tesco's Fresh & Easy used the ground breaking ceremony and press conference to signal its intention to open numerous Fresh & Easy markets in the San Francisco Bay Area and elsewhere in Northern California. In January 2008 the grocer announced it's plans to open 18 Fresh & Easy stores in the San Francisco Bay Area.

As regular readers of Fresh & Easy Buzz know, Tesco hasn't to date opened any of its confirmed 37 stores (18 in the Bay Area and 19 in the Vacaville-Sacramento region) in the Northern California market.

As we wrote in this piece on April 19, 2010 - Tesco Debating Whether to Launch Fresh & Easy Into Northern California This Fiscal Year... or Wait - Tesco is debating whether or not to start opening some of the 37 (19 in the Vacaville-Sacramento region and 18 in the San Francisco Bay Area) this year.

However, the fact that the 5800 Third Street condo project will have its first two buildings completed next month, suggests Tesco could open its first Fresh & Easy store in Northern California this year, at 5800 Third Street.

Of course Tesco's Fresh & Easy Neighborhood Market could wait until 2011 to open the store, although leaving it sitting empty for six or more months after the first two buildings in the condo project have been completed isn't a smart thing to do, in our analysis. Fresh & Easy has already generated a considerable amount of ill will from many residents living in the numerous Northern California neighborhoods where its future store sites - some completed, others partially worked on, and still others in which no construction has even began - have sat unopened for over two years.

As we've mentioned in past pieces in Fresh & Easy Buzz, it's our analysis that the 5800 Third Street location in San Francisco has the potential to be the best performing store of the 37 confirmed Fresh & Easy Neighborhood Market locations in Northern California. We still believe that to be true.

We've also long held that the store in the Third & Carrol Street development will be the first Fresh & Easy unit Tesco opens in Northern California. We still predict this will be the case.

Among the reasons 5800 Third Street should be the first Fresh & Easy store for Tesco to open in Northern California are: It's located in the region's premiere city, San Francisco; the Bayview neighborhood is an urban "food desert," a fact much attention was given to, including by San Francisco Mayor Newsom, when Tesco announced its plans to open the store in December 2007; and the store is new, from-the-ground-up construction, and thus can serve as a showcase for the grocer in its Northern California region launch. As such, we predict it will be (and if not should be) the first store Tesco's Fresh & Easy Neighborhood Market opens in Northern California.

For example, at that December 2007 press conference, current San Francisco Mayor Newsom, who's running for the position of California Lieutenant Governor said: "I applaud the Goldman Sachs Urban Investment Group for its vision and I am excited that an institution like Goldman Sachs is making a long term commitment to this city. A development like 5800 Third Street is critical for the revitalization for this area and the broader Bayview community. This project represents exactly the kind of growth we are trying to encourage across the City."

Newsom and members of a coalition of San Francisco elected officials and Bayview residents, who've been working to attract grocers to the neighborhood for many years, also praised Tesco and Fresh & Easy Neighborhood Market CEO Mason at the December 2007 press conference for its decision to locate a Fresh & Easy market in the Bayview district.

Based on information from our sources, however, Tesco has not yet decided if it will open the 5800 Third Street, San Francisco, store - or any of the other sites in Northern California - this calendar year. Tesco operates on a fiscal year system. It's 2010/11 fiscal year, which started in February 2010, ends at about that same time in 2011.

If Tesco's Fresh & Easy Neighborhood Market plans to open the 5800 Third Street location this year - or even by early 2011 - we should know very soon, since once the 15,000 square-foot building is completed the grocer would have to start work on its interior - installing flooring, shelving, checkout stands, refrigerated and frozen cases and the like - which takes at least a few months to do. Stay tuned.

Selected Related Posts - Fresh & Easy and San Francisco's Bayview

Click here and here for a selection of past stories about Tesco's Fresh & Easy Neighborhood Market and the San Francisco Bay Area. (See the numerous links to other posts as well. Also you can click the "newer posts" and "older posts" links at the bottom of each page.)

Click here and here for a selection of past posts about Tesco's Fresh & Easy Neighborhood Market and Northern California (See the numerous links to other posts as well. Also you can click the "newer posts" and "older posts" links at the bottom of each page.)

Recent Stories in Fresh & Easy Buzz's Northern California Special Report Series

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